By Richard Courtney and George Cassidy, authors of Come Together: The Business Wisdom of The Beatles. Courtney is a professional Realtor and has served as chairman of the Electric Power Board of Nashville and is the founder and chair of the Nashville Beatles Festival. Cassidy has worked as a business writer and analyst for companies including Deloitte Touche Tohmatsu and Bank of America. Cassidy is also a working songwriter and freelance recording engineer. Beatles music and lore have run deep in both authors DNA for more than thirty years.
Everybody knows that the Beatles were perhaps the ultimate rock band. Fewer realize that the Beatles may also be the ultimate business case study. Close attention to their 50-year journey – from their scruffy teenage beginnings to their recent multimillion-dollar iTunes deal – yields innumerable insights into how to run – and how not to run – a business.
Some of these insights are surprising. Consider, for example, how Lloyd George broke up the Beatles.
George, who died in 1945, was a former British Prime Minister and the architect of the British “super tax” that taxed the highest earners at marginal rates of up to 95%. The super tax became an issue for the Beatles as soon as they began to earn serious money. And they just as quickly began to grumble about it. George Harrison’s famously acid song, Taxman, with its equally famous formulation – one for the Beatles, and 19 for the Taxman – appeared in 1966, roughly at the midpoint of their career. This shows that the super tax was very much on their minds.
In fact, from beyond the grave, Lloyd George was gradually forcing the Beatles to spend more and more time figuring out how to shelter their income – often in ill-advised side ventures – rather than making music. The tensions and complications that arose from these misadventures may have as much as anything else to do with their eventual breakup.
Let’s delve a little deeper.
In 1967, the Beatles were informed that they had a large pile of cash that they would need to invest or else pay almost all of it straight into Her Majesty’s Treasury. In late 1967 and early 1968 Apple Records, Apple Retail, Apple Music, Apple Film, and assorted short-lived undertakings based on fleeting Beatle whims, came into being under the loose rubric of a corporate entity called Apple Corps Ltd. Without the potent tax dilemma, it is doubtful that the Apple group of companies would have been founded.
While a reorganized Apple became very, VERY profitable over the long-term by focusing on its one reliable franchise – the music of the Beatles – most of the companies under the Apple umbrella began losing extravagant amounts of money, and quickly. By the end, Apple had devoured the initial capital and then some. The Beatles had each overdrawn their personal corporate accounts. Perhaps worst of all, they would still face crushing personal tax liabilities well into the 70s.
As if this were not dispiriting enough, the Apple mess enabled Allen Klein to get a foothold in the Beatles affairs. Klein, who cultivated a gangster’s air of bluntness, informality, and even danger that appealed to musicians, soon became a divisive figure. Lennon, Harrison, and Starr decided that Klein was just the man to sort out the mess at Apple. Paul wanted his in-laws, Lee and John Eastman, for the job. Eventually McCartney was voted down (in Beatle tradition) three to one.
Even as Klein won some major victories for the band, including an unprecedented royalty rate, he began to “bust out” the Beatles like a silent Mafia “partner” in a restaurant. Klein’s pitch – that he should only be paid for increased revenue – had been initially appealing. However, it gave Klein a kind of laser focus on dollars that slighted artistic goals – witness the doctored Let It Be tapes, released over McCartney’s objections, and the numerous ill-conceived LP compilations of the 70s.
Klein was on a collision course with McCartney from day one. Due to a ten-year partnership agreement in 1967, McCartney would essentially be “in bed” with Klein until 1977. Finding this unacceptable, McCartney enraged the other Beatles by suing to dissolve the partnership in 1970.
Today, the surviving Beatles and the heirs of John and George have more than recovered financially from any early missteps. But the whole sad chain of people and events – from Lloyd George to Apple to Allen Klein – raises the question of whether the Beatles might not have behaved a little more rationally – and lasted a little longer – if they hadn’t felt compelled to box clever with the tax code.
Of course, adequate professional representation – the Beatles’ manager Brian Epstein had died in 1967 – might have saved them. With tax policy very much in the news recently, this is the lesson today’s business can take away to avoid the same or similar mistakes. As Badfinger’s Joey Molland put it, “Young people shouldn’t try to be smart. They should hire lawyers to be smart for them.”