Music Business Lessons From The Beatles

“Of course I’m ambitious. What’s wrong with that? Otherwise you sleep all day.”
-Ringo Starr

Image courtesy of Flickr user AndyWithCamera

Image courtesy of Flickr user AndyWithCamera

50 years ago this week, The Beatles touched down in New York City for the first time. It is a cliché, but a truthful one, to say that the pop music world has never been the same since.

By any reasonable account, The Beatles stand among the most successful bands in history, both creatively and commercially. Their story is testament to the idea that art and business are not necessarily incompatible. At their best, the two can even feed and inform one another.

According to the Daily Mail, the Beatles machine was earning an astonishing $56 million in revenue in 1963, only a year before the band arrived in America. By the end of 1964, estimates are that this figure had doubled.

Before they even managed to exit Kennedy airport in New York, reporters asked the group how they had already achieved such heights of success. “We don’t know, really,” said a young Paul McCartney. John Lennon chimed in: “If we knew, we’d form another group and be managers.”

With that in mind, we present a few of the music business lessons that The Beatles left behind.

Help!” The Power of Incentives

One of the most fundamental facts about The Beatles’ success is that they had a lot of help.

From their manager to their producer, from their label to their PR people, specialists outside the band were deeply and personally invested in the band’s success. If The Beatles did well, they would do well too, and vice versa.

Though we’ve come to decry “middlemen” and “gatekeepers” in our industry over the past decade or so—sometimes for good reason and sometimes not—it is undeniable that The Beatles owe so much of the magnitude of their success to these very stripes of people.

Although the band gave away a lot of revenue to their businesses partners (perhaps too much at times), they also made a lot more money, could finance far more experimentation, and reached a far wider audience than they might have otherwise.

Their experience makes clear that artists can potentially benefit more than they lose by having good help—even if that help is, like all things, far from perfect.

When the band members signed with manager Brian Epstein at the beginning of 1962, they gave a powerful partner a good set of reasons to invest himself in them. John Blaney, author of The Beatles for Sale: How Everything They Touched Turned to Gold writes:

“It was in Epstein’s best interests, of course, to get as much money as he could for the group. His rate of commission increased in relation to how much money the group was making, so the more they earned, the more he earned.”

In late 1962, the band updated their contract with Epstein, increasing his commission rate so that he was entitled to 15% of The Beatles’ earnings on up to £100 per week (nearly $2,200 per week today), 20% of earnings from £100- £200, and 25% for anything above £200 (almost $5,000 per week today.)

For Epstein, this was a step up from an earlier contract that had allotted him a modest 10%, with a far higher threshold to cross in order to earn just 15%. Even with the new elevated rate, and after investing his own money into the band, Epstein would later admit that the group made so little for the ensuing 4 months that he collected no commission at all. But he did have the motivation to pull out all the stops and crusade for a band he believed in.

There was nothing particularly “standard” about either one of these contracts. One gave less than what we might consider normal today, and one gave more. Either way, the group faced a tough decision: Do you continue taking almost all of next-to-nothing, with no solid plan of your own to make it grow? Or do you give away a larger share of your potential earnings in order to have capable people invest more of themselves into what you’re doing, thereby earning more than you otherwise might?

It’s a choice that creatives and entrepreneurs are still confronted with today. It’s easy to keep everything for yourself when the stakes are low and no one is invested in what you’re doing. But ultimately, the more you’d like to get, the more you may need to give, one way or another.

McCartney would later sing that “In the end, the love you take is equal to the love you make.” Perhaps a similar kind of thing applies to money, of which in 1963, John Lennon was singing: “That’s what I want.

The Beatles also understood the power of incentives in their own lives. McCartney has been quoted as saying: “Somebody said to me ‘But the Beatles were anti-materialistic’. That’s a huge myth. John and I literally used to sit down and say, ‘Now, let’s write a swimming pool’.”

Of course, nobody makes great art for money alone. But it can be a great motivator for actually getting things done, and for making music that other people actually want to hear.

You Will Make Good Deals and Bad Deals (And there will always be room to make them better)

Paul McCartney has said of their manager that “If anyone was the fifth Beatle, it was Brian.”

Whenever Epstein made smart moves, the band reaped incredible rewards. When he signed them on to play The Ed Sullivan Show in February of 1964, he cut an unorthodox deal that would pay dividends for years to come.

Rather than get the band a higher rate for a single performance, Epstein, knowing that repeat exposure and marquee credibility help win long-term fans, negotiated a lower rate while securing the band top billing, as well as three nights on the show instead of just one.

For this standout series of headline performances, the group earned $10,000, or about $75,000 in today’s dollars. While still a fair amount in its own right, it was the rest of the deal that made these TV appearances so monumental.

The promotional value, implied credibility, and repeat exposure that came from headlining three consecutive Sundays on one of the nation’s biggest television shows helped rocket the band to the top of the US charts rapidly—and establish them as a shared cultural touchstone, rather than as a flash in the pan.

But as instrumental as Epstein was in making The Beatles the band they would become, he was far from infallible.

Image courtesy of Flickr user brizzle born and bread.

Image courtesy of Flickr user brizzle born and bread.

In late 1963, overwhelmed by constant requests from companies that wanted to manufacture and sell Beatles swag such as sweaters, shirts, buttons, belts and drums, Epstein signed a contract allowing a spinoff company called Seltaeb to handle all of The Beatles merchandising agreements. (Read that name in reverse.)

At the time, few people had any sense of just how significant merch sales would become for pop musicians. Accordingly, Epstein agreed to take only 10% of Seltaeb’s merch licensing fees to share between the band and himself. Meanwhile, the operators of Seltaeb, in an effort to encourage as much volume as possible, demanded only a 10% licensing fee for manufacturing and selling Beatles merch to begin with.

This means that despite the millions of dollars in Beatles merchandise flying off the shelves, the band and their manager only retained a paltry 1% of those revenues.

Within a year, Epstein renegotiated the contract with Seltaeb so that he and the band split nearly 50% of Seltaeb’s revenues. But by then the damage was done: The Beatles and Epstein lost up to $100,000,000 in estimated potential revenue.

One company, The Reliant Shirt Corporation, sold over a million Beatles t-shirts in just three days. 10% of the $100,000 licensing fee they paid would have earned the band less than $10,000 to split four ways.

To make matters more comical, this income would have then been subjected to the 95% supertax that The Beatles were expected to pay in their native England. (Quite literally, “one for you, nineteen for me.”)

The band would make many of their own business blunders as well. When they started Apple Corps—essentially in order to dodge their enormous tax bill by reinvesting their earnings into questionable new businesses they knew nothing about—they hired bad help, neglected to write out contracts, and generally hemorrhaged money for years to come.

But success in business, as in art, isn’t about getting everything right. It’s only about getting more right than you get wrong.

Respect Yourself and Your Rights

Image courtesy of Flickr user drmountain.com.

Image courtesy of Flickr user Dr Mountain

Perhaps it was their experience with Seltaeb that caused The Beatles and their managers to take increasingly tight control of their copyrights going forward.

Once they paid their dues, and their catalog and stature had been developed, saying “no” more often than “yes” helped preserve the value of The Beatle’s music, its economic power, and its cultural importance.

Even to this day, The Beatles catalog remains one of the most valuable in all of popular music, due in great part to how much it has been protected from overexposure in the media.

This reluctance to license their music everywhere eventually led to a payout of a whopping $250,000 for the brief use of the song “Tomorrow Never Knows” in a 2012 episode of Mad Men.

It wasn’t the first time the show’s producers had asked to use a Beatles song. This license approval followed a long string of rejections. By setting the price tag high, it was possible to ensure that the band’s work would be used only when it made sense artistically, and not just commercially for some third party.

This stands among a small handful of original Beatles recordings ever used in film and television. Other instances included brief appearances in seminal and influential 1960s TV shows Dr. Who, The Prisoner and The Monkees, as well as over the opening credits for The World According to Garp, and the closing credits of the 2010 film The Social Network.

Their collection of #1 singles, released in 2000, went 12x Platinum, becoming the best-selling album of the 21st century, in an era when recorded music revenues dropped by a whopping 60%. They made millions on video game sales with Rock Band in 2009. Sony paid almost $100 million to gain temporary control of 50% of their publishing rights in 2005. And whenever an online store or music service is able to negotiate access to their catalog, it is seen as a major coup, and a legitimizing force for their brand.

Go Where The Market Tells You

One of my favorite John Lennon quotes has long been, “Life is what happens to you while you’re busy making other plans.” This is not only a favorite because it’s true, but because it implies that even for John Lennon, becoming John Lennon was Plan B.

No matter what we end up doing in life, it’s unlikely to be exactly what we had anticipated. It’s a wise artist who keeps an ear open for what the times want from us, and who recognizes that there is only so much of our own will that we can impose on the world.

For The Beatles at the beginning of their career, this meant going wherever the paying gigs were, and performing constantly, often from midday until morning.

The_Bealtes_with_Jimmie_Nicol-cc-license-via-google-images

The Beatles perform in the Netherlands in June, 1964

In 1960, that meant leaving Liverpool for Hamburg, Germany, where they found a more happening and less saturated market for bands of their kind.

In 1961 it meant returning to Liverpool, where they now benefited from exotic billing as “The Beatles: Direct from Hamburg”, helping them stand out from the crowd.

In 1962, it meant returning to Hamburg to earn more money in half the time it took two years prior. On this trip, they earned about 2000DM per show, or just over $4,000 in today’s dollars.

In 1963, it meant playing regularly on BBC radio programs for an average of about £55 per show or just over $1,000 in today’s dollars. That year, they earned about £42,000 from live performances, or just shy of $1 million in today’s dollars.

In 1964, it meant leaving the UK (population ~50 million, GDP $93 trillion) for the US (population ~200 million, GDP $657 trillion) and upgrading from third-tier American labels to first-tier ones.

After 1965, it meant leaving behind touring for good, as the audio technology of the time just couldn’t keep up with the demand for reasonably-priced, ever-larger concerts by one of the world’s favorite bands. At that point, the studio just made more sense for everybody.

And In the End…”

Paul McCartney has looked back on the moment that manager Brian Epstein died of a sleeping pill overdose in 1967 as the beginning of the end. To him, the breakup of The Beatles three years later had a lot more to do with that than with scapegoats like Yoko Ono, or anything else.

Relations in the band slowly but surely devolved into drug-fueled finger pointing, petty squabbling and creative tension, but the legacy they left behind in less than 10 years has stood as a monument for more than 50.

In their early days, a reporter asked the band if their time in the spotlight was all just a fad. “Obviously,” said Lennon. “Anything in this business is a fad. We don’t think we’re going to last forever. We’re just going to have a good time while it lasts.”

At another press conference, a reporter asked if the band would sing them a song. “NO” they answered in unison. Another reporter pressed them, saying, “There’s some doubt that you can sing.” Lennon replied: “No… we need money first.”

Justin Colletti is an audio engineer, educator and journalist.

This entry was posted in All Stories, Featured Stories, February 2014, Industry Trends. Bookmark the permalink. Both comments and trackbacks are currently closed.
  • Sign up for our Email Newsletter

     

  • E-news and Updates

    Subscribe to Trust Me, I'm a Scientist Find me on Facebook Find me on Twitter Email Trust Me, I'm a Scientist