Apple faces business problems

By the fall of 1968, it became obvious to both Apple’s management team and The Beatles that the company’s financial situation was unsustainable. In October of that year, Stephen Maltz, who had served as The Beatles’ accountant and financial adviser for nearly four years, resigned. He sent a detailed five-page letter to each member of the band, outlining the dire financial straits they faced.

Dear John, Paul, George and Ringo, As you are aware, I am leaving Apple today and since I have been connected with you for approximately 3 years, I feel that this is a good occasion to express some of my views and make certain observations. […]

After six years work, for the most part of which you have been at the very top of the musical world, in which you have given pleasure to countless millions throughout every country where records are played, what have you got left to show for it? I am sure you have derived great satisfaction from your work and that materially you have had every comfort you desired. You have had the opportunity of doing whatever you wished to do and to search for whatever you are searching for, but my concern only for you is purely so that you can have enough money to go on doing all these things. Two of you have money in the bank and a vast holding in a public company, but are these shares, in fact, worth to you what they are quoted at? You have shown no inclination so far of diversifying your assets. They are all locked away in a Company solely dependent on you. You therefore have no freedom of action as far as that is concerned. All four of you have houses, cars etc., but you also have tax bills to be paid and tax cases to be won. Meanwhile, the spending goes on. You have already spent the second GBP 400,000 due under the goodwill scheme that has not been approved as yet by the tax authorities. You all have assets in the form of your shares in the Apple companies, but this is only paper until Apple can be built into a position where that paper can be sold, but at the rate Apple is progressing, it seems likely to me that this paper will eventually be valueless. Your personal finances are in a mess. Apple is in mess and I believe honestly that the only way you can get out of it is by trusting Neil and talking to him not as a road manager but as a managing director.

Please believe me when I say that my only wish for you is that you have the millions you so richly deserve, and I hope that I will still have the opportunity of being able to speak to you as frankly and honestly as I have always tried to do.

With all best wishes to you,

Stephen Maltz

From “The Beatles Apple And Me” by Stephen Maltz, 2015

It remains uncertain whether The Beatles read the letter or took it seriously. Alistair Taylor, one of the many Apple directors, had to explain the situation to The Beatles.

The meeting Alistair had with the Beatles and Neil Aspinall was extremely difficult. Just for once they listened to the man with the shiny shoes and his advice. He showed them that Apple was losing in the region of £50,000 week in and week out. Projected over a full calendar year the losses would amount to £2.6 million. (Allowing for inflation that equates to around £30 million today.) Yet executives were buying expensive pieces of art for their offices. Equipment of all kinds was ordered and disappearing within hours including major items of furniture and hand made carpets. Staff were given ridiculous salaries. Apple was a magnet for every freeloader and petty thief in London and, indeed, the world.

“If you allow things to carry on the way they are you will lose all of your money within twelve months,” he told the Beatles.

“Don’t be a drag Al,” was Lennon’s immediate response.

“Apple is far too big and complicated a business to be run by Neil and me,” Alistair replied. “We are not up to the job and I include myself in that statement. This company needs a figurehead, a proven businessman. You need someone like Lors Beeching. Otherwise, we’ll all be on the scrap head.” With that, he closed his briefcase and walked towards the door. Everyone was very quiet.

“It’s your decision,” he told them as he left the office.

From “Hello Goodbye, the story of Mr. Fixit” by George Bunby, 2001

I was getting very worried by now, and I called the boys in, sat them down, and said, ‘Look, this can’t go on!’ Neil [Aspinall] was with us and he was more on their side than mine. I said, ‘Something has got to be done. We cannot go on like this. Look at us. We’re a multi-million-pound company, and you’ve just got us five guys running this company. I can’t speak for everyone, but, for me, it’s beyond me to do it like it should be done. I think we need a top businessman in here to run it. Somebody to control the company.’ John then began to realise that money was flying out.

Alistair Taylor – Apple general manager – From “The Beatles: Off the Record” by Keith Badman, 2008

For the people who were there, it was too much to run. I’m not an administrator, I’m a terrible administrator, you know. Certain things I’m good at, and some things I’m not, of course. The Beatles weren’t skilled in administrations, why should they be? So, no one was really running the place. It was running itself, but places can’t run themselves. They have to be run, so someone had to come in and do it. This someone turned out to be Allen Klein [early 1969].

Derek Taylor – Apple press officer – From “The Beatles: Off the Record” by Keith Badman, 2008

We would just spend money, but we didn’t know where we were spending it from or if we had paid taxes on it. We were really in a bad shape as far as that was concerned. Really, none of us could be bothered. We just felt as though we were rich because, really, we were rich, by how many records we had sold and what we did. But it wasn’t really the case. It was just so untogether, you know, the business side of it.

George Harrison – From “The Beatles: Off the Record” by Keith Badman, 2008

People were robbing us and living on us … Eighteen- or twenty-thousand pounds a week was rolling out of Apple and nobody was doing anything about it. All our buddies that had worked for us for fifty years, were all just living and drinking and eating like fuckin’ Rome! And I suddenly realised it … We’re losing money at such a rate that we would have been broke, really broke. We didn’t have anything in the bank really, none of us did. Paul and I could have probably floated, but we were sinking fast. It was just hell, and it had to stop!

John Lennon – From “The Beatles: Off the Record” by Keith Badman, 2008

There were huge expenses bills, catering, drinks, free cars and houses for people. Every Beatle had his own personal assistant, all of them overpaid.

Tony Bramwell – Quoted in Classic Rock, May 2020

Everybody connected with us is millionaires except for The Beatles. They used to tell Paul and I we were millionaires, and we never have been… George and Ringo are practically penniless.

John Lennon – Quoted in Classic Rock, May 2020

We’re extremely vulnerable and we know it. We have made a lot of mistakes because we were too ambitious at first. We tried to do too much at once and the result was chaos. We should never have tried to beat Marks & Spencer with the boutique idea and the other divisions like feature films and electronics were too premature. Now, we have put these companies on ice and are concentrating our activities on records and music publishing. We are all four heavily involved in Apple, although John and I have more money in it because we’re richer … We used to be too generous, but now, if a group comes along and asks us to buy them amplifiers, we’ll tell them to get themselves together as a group first and then come and see us, otherwise it becomes charity, and people resent charity.

Paul McCartney – May 1969 – From “The Beatles: Off the Record” by Keith Badman, 2008

I can see people will read about Apple now and think it a proper hoot, a right old laugh. Well, I can tell you, I wasn’t laughing l at the time. It was a heavy time for all of us, and the Apple fiasco just piled on the agony.

It would be fair to say that we were open to suggestions at that time. Possibly due to illegal stimulants. John had arrived with Magic Alex and introduced him as the new guru. I don’t think the rest of us believed in any of that. He was simply John’s mate. The thing about Magic Alex is that he had some interesting ideas. He just couldn’t pull them off. We didn’t know anything about physics or engineering. So, when this guy starts talking about how he’s invented musical wallpaper-“loudpaper, I think it was going to be called-we sort of went along with it.”Yeah, mate, why not? Off you go, here’s a load of money.”

Coloured air, that was one of the ones that was a bit too far out. The levitating house I only heard about later. John and George might have agreed to donate the engines from their cars to help build this bloody flying saucer. But certainly didn’t go that far. Maybe I was a bit more sceptical than the others. Anyway, Magic Alex couldn’t actually do any of this stuff. He said he’d build us a state-of-the-art recording studio and we let him get on with it, but he didn’t have a bloody clue where to start.

You know that scene in The Rutles where the George character is being interviewed outside the Apple building and, behind him, there’s all these shifty characters making off with TV sets and expensive tables? Well, that’s what it was like. It was a case of anything that wasn’t nailed down. It was a complete free-for-all. There was no one there to say, “Hang about, we’re not having any of this far-out nonsense. Stopnicking the fucking stereos, lads. “At one point, we found out that one of the office boys was making off with the lead from the roof. People would walk into the boutique, just grab stuff off the shelves and walk out. It was total chaos. There was always a wild party going on. I remember showing someone round the office late one night and there was a couple having it off on the floor. Looking back, it was always heading for a fall.

Paul McCartney – Interview with UNCUT, July 2004

Earlier in the year, at the initiative of Paul McCartney, The Beatles began searching for a new manager for Apple.

In July 1968, Paul McCartney met with Lord Poole, chairman of the London merchant bank Lazard Brothers & Co., who proposed to examine Apple’s finances free of charge without any official involvement. Paul, however, did not follow up with him.

In November, John Lennon consulted with Richard Beeching, the former chairman of British Railways, known for his report in the early 1960s that led to extensive changes in the railway network, known as “the Beeching Axe”. The meeting was unsuccessful, with Richard Beeching advising John to “stick to making records“.

They explored other ideas. They met with Lord Arnold Goodman, a British lawyer and political advisor, and Cecil King, who was chairman of the International Publishing Corporation (the world’s largest publishing empire at the time) until 1968. However, both declined the offer.

In October 1968, Paul met with Lee Eastman, Linda Eastman’s father and Paul’s future father-in-law. Paul soon became convinced that Lee Eastman, a New York attorney experienced in music copyrights, was the right person to manage The Beatles’ financial affairs. Lee Eastman certainly had the necessary expertise.

The other members of The Beatles were not comfortable about the idea of Paul’s future father-in-law managing Apple, but, in January 1969, they consented to have Lee Eastman and his son John serve as business advisors temporarily. They all signed a document early January 1969 (maybe during their January 12 meeting) giving the Eastman & Eastman law firm rights to negotiate contracts on the Beatles’ behalf.

There was a point when Paul, with the support of the others, went looking for a major figure to run Apple, on the basis of they were so big and powerful that Neil and I were not qualified to do it. Paul felt that the Beatles needed the biggest and the best to run their corporation. They interviewed English tycoons like Cecil King and Dr. Beeching, but these people were not interested. Not only that, they knew nothing about the music business.

Peter Brown – From “Those Were The Days 2.0: The Beatles and Apple” by Stefan Granados, 2021

We’ve been looking for a Beeching figure to come in and organise us. We had several of ’em in, but they just didn’t come up to scratch. The chaps we had in the interview were bigoted. They thought they knew everything and that they were just dealing with four clowns. But we saw through them right away and felt we couldn’t offer any one of them the £20.000 a year we were prepared to pay. We could fall flat on our faces — but, so what if we do ? But at the moment we can only see success.

John Lennon – From the Daily Mirror – June 12, 1968

I met a lot of people including Lord Beeching, who’s one of the top people in Britain and all that. And though he didn’t want to take the job, Paul had told me, “Go and see Lord Beeching.” So I went. I mean I’m a good boy, man. And I saw Lord Beeching and he was no help at all and he didn’t look nice. I mean, he was alright. He was alright, and everybody I interviewed for the… while Paul was in America getting Eastman, I was interviewing all these top so-called “people.”

John Lennon – From “Lennon Remembers: The Full Rolling Stone Interviews from 1970” by Jann S. Wenner, 2000

Paul had been agitating for some time for a new manager for Apple. He was fed up with the way that the company was being run and he asked his future father-in-law, Lee, to recommend someone to put the house in order. Lee, of course, recommended his son, John.

Nat Weiss – Beatles attorney – From “The Beatles: Off the Record” by Keith Badman, 2008

I put the Eastmans up. I thought they would be fair. For one thing, they are lawyers. They don’t take percentages, they take a fee. So, they manage you, and, at the end of the year, they put in a bill. And, if you don’t like them, you don’t pay the bill. Well, you pay the bill, but you sack them for the next year.

Paul McCartney – From “The Beatles: Off the Record” by Keith Badman, 2008

[Lee Eastman] would have been good business-wise, but of course he would have too much of a vested interest. He would have looked after me more than the others, so I can understand their reluctance to get involved with that.

Paul McCartney – From “And in the End: The Last Days of the Beatles” by Ken McNab, 2020

John Eastman gave me the impression of being an inexperienced, somewhat excitable and easily confused young man. We all knew of Paul’s friendship with the family … I was against the idea of having, as manager, anyone in such a close relationship with any particular Beatle, but, apart from that, they did not strike us as having the right experience or knowledge for the job which had to be done.

John Lennon – From “The Beatles: Off the Record” by Keith Badman, 2008

NOW BEATLES AXE APPLE FILMS

THE Beatles, who closed down their fashion shop two months ago, are now to axe their film division. Four major productions which were once envisaged are no longer. But Denis O’Dell, the 41-year-old producer the Beatles brought in to head the division, still stays as a director of Apple.

Reason for the close-down? It may be because no films have yet been directly made by Apple. (No. “Yellow Submarine” got their blessing but was produced by an independent outfit.)

And Mr. O’Dell says: “This decision has been reached because more time is to be devoted to other interests.” I imagine that means records and music publishing, where the Beatles know the business backwards.

Denis, who was associate producer of the Beatles’ first film, “A Hard Day’s Night,” will now make his own films — or through Suba, a company founded by the late Brian Epstein and still linked with Apple.

From Daily Mirror – October 5, 1968

THE BEATLES MAY SIGN UP DR BEECHING

LORD BEECHING, the man who shook up British Railways, may take a hand in streamlining the Beatles’ show-business empire. The Beatles announced last June that they were seeking “a Beeching figure” to take charge of their multi-million-pound Apple Corps organisation. Beatle John Lennon said then that several people had been interviewed. But he said: “They were all too bigoted.”

Lord Beeching, 55, has had talks with Lennon and fellow-Beatle Paul McCartney at the Apple offices in Savile Row, London. Last night, Lord Beeching said at his town home near Marble Arch: “I would like to help the Beatles as I greatly admire their talent. But it is not an appointment to which I could give total involvement as I see it now.“

He added: “I would rather help them where I can. I think that is where the matter rests at this stage. I like them very much, and we had some discussion about their aims and objects. But the discussion was sketchy. I cannot say anything further. But it may be that I will try to help them where I can.”

The salary offered to a “Beeching figure” was £20,000 a year. To entice Beeching himself, the Beatles — Lennon, McCartney, George Harrison and Ringo Starr — will certainly have raised the offer to more than £30,000.

But, I understand, Lord Beeching would not want to take full pay for part-time services. Lord Beeching resigned his full-time job — £44,000-a-year deputy chairman of Imperial Chemical Industries — last February.

Later, he turned down several big-business jobs. The Beatles are pleased with his readiness to help them. But they still hope to get him full-time. Beatle Lennon said last night: “He has a good head on his shoulders.“

From Daily Mirror – November 12, 1968

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