Three Managers: an Historical Retrospective. Part 1: Brian Epstein
By Dawoud Kringle
The artist managers presented in this three-part series are Brian Epstein, Peter Grant, and Michael Jeffrey. The 60s and 70s were a time of volatile transformations in the music business. A retrospective of these three artist managers from this period can be instructive.
Brian Epstein was born into a family of successful retailers in Liverpool, England in 1934. His grandfather Isaac Epstein founded Epstein & Sons Furniture Store which later expanded to sell household appliances and musical instruments. They founded North End Music Stores, which was well known for its lenient credit requirements (Paul McCartney bought a piano from them).
During WW2, Epstein was expelled from two schools for laziness and poor performance. He attended several boarding schools and studied the violin for a short time. He became interested in the arts, particularly theater. The strictness of the schools did not sit well with him. Shortly before his 16th birthday, he sent a long letter to his father Harry Epstein stating that he wanted to become a dress designer. His father was adamantly opposed to this. After serving a six-month apprenticeship at another company, Epstein was practically forced to work at the family’s furniture shop for a weekly wage of £5. In 1952, he was conscripted for military service and was discharged two years later on the recommendation of an army psychiatrist. After returning to Liverpool, he managed the Clarendon Furnishing shop in Hoylake, and in 1955 was made a director of NEMS.
On returning home from a trip to London (where he was robbed), he confessed his homosexuality to a psychiatrist. The psychiatrist was a friend of the Epstein family and suggested to Harry Epstein that his son should leave Liverpool as soon as possible. During the sessions, Epstein revealed his ambition of becoming an actor, so his parents allowed him to go to London to study.
In autumn 1956, Epstein enrolled in a two-year course at the Royal Academy of Dramatic Art (RADA) in London. His RADA classmates included actors Peter O’Toole and Albert Finney. Epstein dropped out after the third term, later saying that he had become “too much of a businessman to enjoy being a student, and I didn’t like being a student at all.”[In late April 1957, Epstein was arrested for soliciting an undercover police officer for sex (Homosexuality was illegal in Britain at this time.) He pleaded not guilty and was sentenced to two years probation. While still serving probation in May 1958, he was assaulted by a casual sex partner in Liverpool and extorted for money. Epstein reported the encounter to the police, forcing him to testify in court and reveal his sexual orientation to his family.
After his withdrawal from RADA, Epstein returned to Liverpool, where his father put his son in charge of the record department of the family’s newly opened NEMS music store on Great Charlotte Street. Through his work in the record department at NEMS, Epstein gained considerable knowledge of the pop music business.
Epstein heard about The Beatles in Mersey Beat Magazine. In November 1961 when he was managing a record store in Liverpool. After several customers had asked for “My Bonnie,” a single the Beatles had recorded in Germany, he went to The Cavern Club to see them for himself (apparently, the club manager treated Epstein like a VIP). He was impressed with the group and met them backstage in their dressing room, which he later describes as being the size of a broom closet. The Beatles knew who he was, being regular customers of NEMS.
He sought out The Beatles’ former promoter, Allan Williams, to ask his advice about managing the group. Recalling a bad deal he had signed in Hamburg, Williams told him to avoid them.
On December 3, 1961, Epstein scheduled a meeting with the band (which John Lennon, George Harrison, and former drummer Peter Best arrived late as they had been drinking), and offered to manage them. The following month Epstein and The Beatles signed their first management contract (McCartney, Harrison, and Best were under 21 and therefore needed the consent of their parents to enter into a contract). The terms gave Epstein up to 25% of their earnings. At that time the band ignored the one-sided deal and were simply happy to have somebody looking out for their interests. On October 1st, 1962, four days before the release of “Love Me Do”, Epstein signed Lennon and McCartney to a three-year NEMS publishing contract. He also incrementally convinced them to change their image from leather-clad hoodlums to lovable mop-tops in matching suits (which the band initially resisted; they were kids and acted like kids).
After Decca passed on the Beatles, Epstein secured them a deal with George Martin at EMI. In early February 1962, Epstein visited the HMV store (owned by EMI) in London to have the tape Decca rejected transferred to 78 rpm acetates. An HMV disc-cutter named Jim Foy liked the recordings. Epstein soon contacted Sid Colman, the head of EMI’s record publishing division.
It was around this time Epstein convinced them to fire Best and recruit Ringo Starr (formerly of Rory Storm and the Hurricanes) into the band. They’d already worked with Starr when he subbed for Best and had recorded with him. Once the decision to replace Best was made, Epstein’s task of dismissing Best was complicated by the fact that he was technically under contract to provide management to all four members of the Beatles. A lawyer had informed him that the Beatles could not expel Best under the terms of their contract; they could only legally disband and then re-form with Starr. Epstein thus had to secure paid work for Best if he was to leave the group. He solved this by hooking Best up with a position with the Merseybeats.
Their original EMI contract gave The Beatles one penny for every record sold, split between them. At the time, a single sold for about six shillings and threepence. This meant The Beatles’ royalty worked out at 0.35 percent each. Outside the UK the royalty rate was half a penny per single split four ways.
Following the success of the group’s second single, “Please Please Me,” Epstein created a publishing company, Northern Songs with music publishers Dick James and Charles Silver to control the copyright of all Lennon/McCartney compositions between 1963 and 1973. 51% of the company was owned by James and Silver, Epstein owned 9% and Lennon and McCartney (the ones who actually wrote the songs) shared the remaining 40%. When James and Silver sold their shares to Lew Grade’s Associated Television in 1969 the songwriters were denied the rights to their own compositions.
His merchandising deals were, at best, problematic. As Beatlemania was exported to the US, dozens of companies pitched Beatles-themed products to Epstein. He was forced to reject them all because he had already given away 90% of the merchandising rights to Seltaeb, a company run by Nicky Byrne. It is estimated that in the long run, this decision alone cost The Beatles about $100 million.
Epstein attempted to get the Beatles to sign a deal guaranteeing a fixed salary of £50 a week in perpetuity and he would keep the rest. The group declined Epstein’s offer, believing that they were worth much more than £50 a week.
At one point, Fender, the guitar manufacturer, tried signing the Beatles to an endorsement deal. However, the Beatles were already under contract with Gretsch. There are rumors and vague accounts that Fender allegedly bribed Epstein $10,000, a significant sum of money at the time, to sign the Beatles to an endorsement deal. It’s understandable how Fender would have wanted to sign the Beatles to an endorsement deal. While there is no concrete evidence that Fender bribed Epstein (and Fender has denied it), the allegation has been made by several sources. In 2004, Epstein’s nephew, Peter Brown, wrote a book in which he claimed that Fender had bribed Epstein. Brown’s book is based on his recollections, as well as interviews with people who were close to the Beatles at the time.
There are more examples of how Epstein’s skills as a manager left something to be desired. One example was at the meeting where contracts for the 1964 film A Hard Day’s Night were to be signed. Epstein told the lawyers representing United Artists they would not settle for anything less than 7.5%. He was unaware that they had originally resolved that the Beatles would receive no more than 25% of the profits.
Around 1964, The Beatles’ and Epstein’s accountants informed them that they had £2 million that they could either invest in a business venture or else lose to the Inland Revenue (the British government’s tax collection department, disbanded in 20005). At the time, corporate/business taxes were lower than their individual tax bills. Epstein’s personal assistant, Peter Brown, worked to find tax shelters for the income the Beatles generated. Walter Strach was put in charge of these operations. This led to the founding of Beatles Ltd and, in early 1967, Beatles and Co. Beatles and Co. was an updated version of the Beatles’ original partnership, Beatles Ltd. Under the new arrangement, each member of the Beatles would own 5% of Beatles and Co. A new corporation owned collectively by all four Beatles would be given control of the remaining 80% of Beatles and Co. With the exception of individual songwriting royalties, which would still be paid directly to the writer or writers of a particular song, all of the money earned by the Beatles as a group would go directly to Beatles and Co. and would be taxed at a significantly lower corporate tax rate. Epstein originally treated it as a merchandising company used to justify it to the authorities. When the Beatles were touring, Epstein sent his roster of artists on “package tours” around the UK, a common practice at the time (at the time, Epstein also managed Gerry and the Pacemakers, and Billy J. Kramer and the Dakotas). This involved short sets by each act, alternating with a comedian. The schedule was hectic. It’s interesting to note that while Epstein was entitled to be reimbursed by the acts for expenses incurred, he did not see himself as being part of a touring group. He paid for flights to and from the United States, international telephone calls, and similar expenses from his own 25% share in profits.
The Beatles made their last official live appearance in Britain on May 1st, 1966, at the NME Annual Poll-Winners’ All-Star Concert. Although the concert was televised, the cameras were switched off while the Beatles played, because Epstein and ABC TV had failed to agree on terms. The Beatles’ hectic schedule kept Epstein very busy between 1963 and 1965 with touring plus television and film work. Their last live concert was at Candlestick Park in San Francisco on August 29th, 1966,
When the band retired from touring to focus on making records, he lost a big part of his job; booking shows, arranging tours, managing the stage, and holding press conferences. This left him with nothing to do but manage the group financially, which he had no aptitude for, and probably didn’t enjoy.
As early as 1962, Epstein started developing a substance abuse problem. He habitually used amphetamines and was drinking excessively. During the recording of Sergeant Pepper’s Lonely Hearts Club Band, he unsuccessfully tried to get his drug and alcohol problem under control. He was also addicted to gambling spent a lot of time in upper-class gambling parlors, and lost a lot of money.
And yet, despite the bad business deals, troubles with alcohol, gambling, drugs, and homosexuality when it was still illegal, the Beatles showed tremendous loyalty to Epstein. He was known to be kind and caring to his family, friends of his family, and business colleagues. He was the best man at the wedding of John Lennon and Cynthia Powell. During Cynthia’s pregnancy, Epstein paid for a private room in a hospital and offered the Lennons the sole use of his flat. He was also godfather to Julian Lennon.
On August 27, 1967, Epstein was found dead in his London flat from an overdose of barbiturates. He was 32 years old.
Beatles and Co. were in the process of being transformed into Apple Corps at the time of Epstein’s death. This forced the Beatles to accelerate their plans to gain control of their own financial affairs. Apple Corps would provide an umbrella to cover the Beatles’ financial and business affairs. In its early years, Apple Corps was a financial and operational disaster. Epstein’s death meant that the Beatles’ inner circle had nobody with the business acumen who could manage the company. The members of the Beatles decided that they would manage it themselves. When the Beatles broke up in April 1970, Apple fell into financial chaos. When the Beatles’ legal partnership was dissolved in 1975, the dissolution of Apple Corps was considered. They decided to continue its operations, while effectively retiring or mothballing its divisions. After years of litigation, the company’s affairs were finally put in order. As of this writing, Apple Corps is still operational. It is owned by Paul McCartney, Ringo Starr, Yoko Ono, and Olivia Harrison. In 2019, their estimated revenue was valued at £18.6 million.
To be fair, Epstein had admitted “I have no musical knowledge, nor I know very much about show business or record business. The Beatles are famous because they are good. It was not my managerial cunning.” With this in mind, it’s arguable that Epstein was in over his head. In hindsight, given the Beatles’ phenomenal success and longevity, the deals that Epstein obtained seem bad from a business perspective. Obviously, if he had known what was to come, he could have more or less named his own price when it came to record deals, publishing, royalties, advances, performance fees, merchandising, etc.. But no one could have predicted how popular they would become. There was simply no precedent for the level of success the Beatles achieved. Epstein had no model to work from and was essentially making it up as he went along, and his management skills and decisions were as good as anyone could expect. It’s often overlooked that he maintained balance in the band and fixed emergencies. After his death, the group lost a person who devoted his life to taking care of them and keeping them as united as possible. In the aftermath, financial and personal tensions between the band members kept increasing.
Over half a century after his death, Brian Epstein is still known as the man who helped propel the Beatles to worldwide fame and change musical history. Despite Epstein’s business blunders and personal problems, the Beatles would have remained an obscure band if it had not been for his career guidance and tireless promotion. This is why he has been lionized as the mastermind who turned the Fab Four into a global phenomenon whose influence on the music business remains in effect to this day.
