Why The Beatles formed Apple

3 – 4 Paragraphs, no more than 600 words

Explain why The Beatles formed Apple- what positive changes did

it bring about to the Music industry and what aspects of Apple ended up being a burden to the band and contributed to the break up?

The Beatles have had 6 members:  Bassist Stu Sutcliffe (deceased)

Drummer Pete Best (fired in 1962) and the best known line up of

John Lennon, George Harrison (guitars);  Paul McCartney (bass)

and Ringo Starr (drums)

They performed and recorded together as The Beatles from 1960-1970

The remain the best selling group of all time- and by far, the most

popular rock band ever with nearly 2.5 billion units sold.


  • Allan Williams -born 17 March 1930 in Bootle, Liverpool

is a former businessman and promoter of Welsh descent.

  • In 1957. he leases a former watch repair building and turns

it into a coffee house called  The Jacaranda,.

  • Art college students John Lennon. Paul McCartney and Stu Sutcliffe are frequent customers, and become friends with Williams. EVentually, he hires Lennon and Sutcliffe to paint murals in the shop. When he discovers they have formed a band called The Beatles, he invites them to perform there in 1958, after they are joined by George Harrison.  The group worked for over a year with fill in drummers often performing with no drummer.
  • In early 1960, Williams, who was by now the manager of the band and securing  gigs for them around the Liverpool area, and in August of that year,  finds them a drummer named Pete Best. Best, auditions and joins.  Now, a 5 piece- the Beatles start gaining popularity in their town of Liverpool and in surrounding towns.
  • For nearly 2 years Williams booked the band wherever he could, and days after finding Best, The Beatles start an engagement at a club in Hamburg, Germany.

They would play there many times between then and August 1962. Initially they lived in squalor conditions in the storage room of an X rated cinema owned by the club owner. During the first visit, Harrison was only 17 and was deported for working underage.  They worked three main clubs: THE KAISERKELLER CLUB


  • The following year, in late 1961, The Beatles had a falling out with Williams

over a 10% commission for one of their return visits to Hamburg.  Furious over their refusal to pay- dropped The Beatles like a hot potato. He never had business dealings with them again. Shortly thereafter, Stucliffe fell in love with a German girl and left to pursue his art career. He died of a brain hemorrhage months later.

  • McCartney takes over bass and adopts the famous Hofner violin bass

in Germany.


Play soundbite of McCartney re: Hofner bass

  • Decades later, Williams wrote a book about his experience in 1977 and both him and all the ex-Beatles spoke fondly of each other. Paul McCartney describes Williams in ”The Beatles Anthology” as “a great guy.”  He also found a rare tape of a Beatles show in Hamburg and released it as  ‘Live! at the Star-Club in Hamburg, Germany; 1962” in 1977.
  • When the Beatles were later taken over by Manager Brian Epstein he went to

Williams and asked if there were any contractual obligations. Williams told Epstein,

“NO, but don’t touch them with a f___ing 10 foot pole- they will let you down.”

  • The Beatles made their first recording in Hamburg, backing another British singer named Tony Sheridan. A couple of the tracks featured only THE BEATLES, and in Germany the label called them TONY SHERIDAN & THE BEAT BROTHERS. The record which was a Top 5 hit in Germany, and had some success in England was a rock version of MY BONNIE LIES OVER THE OCEAN. The tracks The Beatles did with Sheridan would later be released as THE BEATLES with Tony Sheridan, and reach #26 on the Billboard chart in 1964.



  • Brian Epstein was the son of a man who owned a large, successful chain of furniture stores in Liverpool. Next door was a music store that sold everything from pianos to records called the North End Rd Music Store, or NEMS as it was called.

The Epstein family took the store over and opened other NEMS outlets around Liverpool.  Brian had gone to acting school and tried to be an actor, but failed and returned to the family business. Brian’s father, Harry, asked him to run NEMS.

Brian took to the music store like a fish to water, and greatly expanded its record division.

  • In Sept 1961, a customer came to NEMS and asked for MY BONNIE. They did not have it. Then several young girls came looking for it. Epstein found the record on Polydor (it had been released in the UK) and bough several copies. They sold out. A few weeks later, they played a day time show at THE CAVERN club up the street from the NEMS store. After that he managed the group. His long time assistant

Allister Taylor recalls:



  • In the fall of 1961, Brian Epstein, who knew nothing about artist management,

took them on.

  • Epstein gradually groomed them, established the Beatle haircut (from the German days)  and put them in matching suits.
  • •The Epstein style was revolutionary. Apart from the detailed worksheets handed out each week, Brian also made sure that monies due to his artists were dealt with quickly and efficiently. When his groups were on tour they would arrive at hotels prior to concerts and find their weekly ‘wages’ waiting for them, in cash. Unlike many other managers he took care of all tax matters. If an artist hadn’t earned much in any week Epstein would subsidize the payment to them and ‘square up’ during a very good week
  • Between 1961 and fall 1962, Epstein took them to dozens of labels in London including including Columbia, Pye, Philips, and Oriole. Everyone rejected them.
  • Finally the group got an audition with DECCA RECORDS, the German based label in London, who had released the Tony Sheridan album. The audition was

set on Jan 1, 1962, and the Beatles performed 15 songs in one hour, in a studio.

The Audition was recorded for review purposes. They were auditioned  by Decca producer Tony Meehan (ex-drummer of the Shadows) and Decca president Dick Rowe.

Decca Records passes on Fab 4

  • Eventually, Decca Records rejected The Beatles, saying that “guitar groups are on the way out” and “the Beatles have no future in show business”
  • After The Beatles had a #1 Record on EMI, Rowe signed the next beat group that came across his desk: THE ROLLING STONES.
  • After the Decca rejection, The Beatles started having some distance with Pete Best- but he remained the drummer, for now.
  • Epstein, convinced The Beatles could be stars ( and with their local popularity soaring) continues to push until he gets a second shot with EMI Records,

who had already passed on the group once.

The Deal George Martin made to get The Beatles to EMI

  • Sir George Henry Martin CBE (born 3 January 1926) is an English record producer, arranger, composer, conductor and musician. He is sometimes referred to as “the Fifth Beatle”—a title that he has described as “nonsense”
  • He is considered one of the greatest record producers of all time, with 30 number one hit singles in the UK and 23 number one hits in the USA.
  • He was a classical musician who worked for the BBC and was hired in 1950 to orchestral arrangements at EMI. Then promoted as assistant to the president of EMI”s secondary label, Parlophone. He took over the label in 1955, but used it to record mostly classical and for West End Musical soundtracks
  • Martin was also delegated to producing comedy records, which were very popular in the UK in the late 50s and early 60s. He worked with the likes of Peter Sellers and Dudley Moore, who was part of a comedy troupe known as THE GOONS.
  • Martin was desperate to add a solid rock/ pop act that would give Parlophone some legitimacy, Martin was introduced to Epstein, whose enthusiasm for The Beatles was contagious. Martin agreed to a record deal,sight unseen, but only with a royalty rate of 1 penny per record (which had to be split 5 ways- 4 Beatles and Epstein).
  • The Beatles auditioned for EMI on June 6, 1962. Martin was impressed with their material but had reservations about Best and wanted to use a session drummer.

The Beatles took this as their cue to fire Best. Best was fired from the band and Ringo was brought in. (He had filed in for Best when Best was sick and the Beatles decided to keep him).

  • In July 1962, The Beatles began working with Martin in Sept 1962, with new drummer Ringo Starr. At the first session, Martin asked the individual Beatles if there was anything they personally did not like, to which George Harrison replied, “Well, there’s your tie, for a start.” That was the turning point, according to Smith, as John Lennon and Paul McCartney joined in with jokes and comic wordplay that made Martin think that he should sign them to a contract for their wit alone
  • The first release on Parlophone was Love Me Do, released in Nov 1962- it went to #17, which gave them the momentum to keep recording and releasing singles. Next was Please Please Me- which went straight to #1
  • From 1963-1970 The Beatles dominate the entertainment world. They are not only brilliant performers and artists, but amazing songwriters. They spearhead the movement for artists to write and record their own songs.
  • Epstein failed to take advantage of the expiration of the Beatles’ original stingy contract with EMI for a full seventeen months, allowing a ridiculous small royalty rate to remain intact until the contract was renegotiated in November ’66
  • Never considered to be a great negotiator, Epstein’s true strengths were his well-developed organizational abilities, his unflinching honesty, and his conservative, reliable stewardship of the Beatles’ finances. Later on, he is criticized by the ex-Beatles and others for not having the vision to start the band’s own publishing company, whereby keeping 100% of the song publishing. Back then, it simply wasn’t done.
  • The collaboration with George Martin is incredible. His production and arrangements of their raw talent took it to another level. The Lennon & McCartney song writing partnership becomes competitive, causing each to write better and better songs. (Pilato story about Ringo interview and A and B sides)
  • The Beatles swore they would never come to America until they had #1 hit.

They had seen many successful acts in the UK come here and fail miserably.

In Jan 1964, I WANT TO HOLD YOUR HAND is released on Capitol Records

(after two failed singles on indie labels released in 1963) and shoots to #1

Beatlemania, which had taken over the UK and Europe, begins in America.

The Deal Brian Epstein made with Ed Sullivan

Sullivan finds out about the Beatles when his plane is delayed

in London in 1963 because 10,000 screaming girls had turned up at Heathrow to greet the Beatles upon their return from a European tour.

Epstein, following the lead of Col. Parker books the Beatles for 3 shows on Ed Sullivan.  Feb 9,16, 23. In between the Beatles play a few east coast shows

and sell out Carnegie Hall.

The Beatles on Ed Sullivan show broke all TV ratings and remains one of

the biggest audiences in TV history/. Percentage wise- it is still the leader.



  • After the Ed Sullivan appearances, The Beatles are unstoppable.

They sell 15 million records in 1964, alone and command the

#1 – 5 spot on the Billboard chart in the same week!

  • In 1965 and 1966 they are the first musical act to sell out a stadium

Shea Stadium in NYC.  For the First show, they receive $189,000

for 22 minutes of music. Brian could have charged a lot more for tickets to the Shea Stadium concert ($10), but he thought it would be too much and be criticized as excessie


Beatles – Twist & Shout (live in 65) – YouTube


Hard Days Night Trailer:


A Hard Days Night Trailer – YouTube

  • Following The lead of Col Parker, Epstein realized a film career could take the band to a whole new global level
  • Brian Epstein, in a meeting with the producer of A Hard Day’s Night, stated that he wouldn’t accept less than 7 1/2 % of the income from the movie. United Artists had the figure of 25% as a starting point for the deal negotiations. Walter Shenson later volunteered to up the percentage to 20% after the movie was successful.
  • The film did over £1.5 million in its first week- an astonishing box office

in 1964, and the soundtrack yielded several new #1 hits.

  • The film was later purchased by MIRAMAX who re-released it for the 40th Anniversary.
  • Epstein made sure Beatle films would hold up, artistically, unlike the

Elvis ones and snagged Dick Lester to direct.



  • Epstein had no precedent for much of the Beatles success. By 1965, over 80 million records had been sold. The cash coming in was astronomical. He was smart enough to bring in good tax accountants and make sure all taxes were paid, but many of his deals were horribly biased against the Beatles.
  • Brian hired David Jacobs as of his Solicitor in ’63. “From then on all legal decisions and contracts would be made with David Jacobs advice, and it was Jacobs’ law office that took over the task of sorting out the merchandising offers”
  • In early 1963 he negotiated a deal with Nicky Byrne’s. A year later, Once he starts selling millions in merch he realizes it is bad deal.
  • In early ’64 Stramsact, who had the power to grant merchandising licenses, granted a license to six young Englishmen who incorporate a U.S. company, Seltaeb, to act as their agent in America. Seltaeb the official merchandising company, sold over 150 different items. NEMS received 10% until August of ’64 when it was raised to 46%
  • IN 1964 the hotel where the Beatles stayed sold the pillow cases and bedsheets from their beds to a group of businessmen. They were cut up into 160,000 pieces and sold for $1.00 each.
  • REMCO, a large American toy manufacturer, had initially produced 100,000 Beatle dolls and had orders for 500,000 more
  • Reliant Shirt Corporation paid $25,000 for the exclusive rights to make and produce Beatle T-shirts. They purchased 3 factories just to make Beatle shirts

and in 3 days sold over 1 million shirts

  • A factory in the US was set up to manufacture Beatle wigs. Over 35,000

wigs were made per day in 1964.

  • 40 Years after their break up, they remain the most merchandised act in history. The brand has extended to musicals, movies and Cirque DuSoil shows.
  • A full merchandise and licensing effort began on 09 09 09 Sept 9th 2009

The launnch of BEATLES rock band video game; the Beatles CD box set;

In Nov 2010- The launch of Beatles on iTUNES: • Historically  most artists have had a lack of understanding of the merchandising and licensing process in the context of artwork, trade shows, product approvals and so on. The Beatles 09-09-09 mexemplifies in many ways the fundamental shift in the approach to music licensing and how sophisticated the business has become. Apple Corps built an internal infrastructure focused on the process of brand extensions and merchandising and pioneered the approach of first establishing the artwork and image bank and approval process.

  • Beatles merchandise continues to sell today, under The Beatles control

with Apple Corps., their company. A low estimate is that is likely to bring in over $20 million a year for EACH of the 4 Beatles EVERY year.

  • Peter Brown- Epstein’s assistant, stated that Brian did not want any of the Beatles to do personal endorsements for anything, no matter how much money was offered.
  • Pilato Discusses Ringo’s deal with Canandaigua Wines.


  • After a horrible experience in The Philippines in 1966, the Beatles decide to stop touring. Their last show is the COW PALACE arena in San Francisco in August 1966. After a break- they resume recording.
  • They focus on songwriting and recording- creating the greatest albums of their

career between 1966- 1970: Revolver; Sgt Peppers Lonely Hearts Club Band;

Magical Mystery Tour; The White Album; Abbey Road and Let It Be.

  • The Beatles become one of the earliest acts to embrace the recording studio as an instrument in and in itself.


  • JUNE 1967 BEATLES RELEASE SGT PEPPER, considered the greatest Rock

album of all  time by many in the industry.



  • IN 1967, during the making of Sgt Peppers they form Apple Corps to oversee all their business. Epstein sets up the company, but dies one month later in a fatal

mix of alcohol and prescription drugs.

  • The Beatles are devastated and but forge ahead with Apple. Apple Records is established in 1968 when the deal with EMI expires. The Beatles negotiate a deal for EMI in the UK and Capitol Records (their US division) in the USA to distribute Apple in exchange for ownership of all the masters from 1963-1968. The 4 Beatles sign to Apple individually and collectively for 10 years.
  • Apple is myriad of companies that includes a retail clothing store; an electronics company making studio gear; the record label; and a film company. Zapple Records is an off shoot that features avante´garde projects.
  • Between 1968 and 1973, The Beatles sign and release records by a number of new artists including Mary Hopkin, Doris Troy, Billy Preston, Badfinger , The Modern Jazz Quartet, and James Taylor
  • The First single on APPLE is Hey Jude in 1968, which runs a full 7:20.

It is a smash #1 hit forcing radio stations to play

  • The Beatles continued to record for Apple after they broke up as solo artists

until the late 1970s.

What Really Broke Up The Beatles-

the fight over Allen Klein & MACLEN MUSIC.

  • The Beatles did not break up because of Yoko Ono or Linda Eastman,

although they probably didn’t help.  George Martin said it was John

and Yoko’s addiction of heroin that had more to do with it.

  • In 1969, at the urging of Mick Jagger, The Beatles hired

hard-boiled NY manager Allen Klein (manager of Sam Cooke

and Phil Spector and recently The Stones).  McCartney

is  vehemently opposed to Klein and pushes for his new father in law and brother  in law Lee and John Eastman ( established NY entertainment attorneys).

The other 3 Beatles outvote him and hire Klein.

  • While the Beatles continue to work and record together between

1968 and 1970,  they over ride McCartney’s decision to return to

touring. And opt to make a film about the album making process

called LET IT BE.  After the filming, Klein brings in Phil Spector

(a noted 60s producer known for his WALL OF SOUND recordings)

to re-mix and produce the soundtrack album. This causes a huge

fight between McCartney and other Beatles.

  • During this period, The Beatles let Apple slip into total chaos.

Most artists leave, and all but the label is shut down

  • During this period, Lennon loses interest in The Beatles and wants to focus on his projects with Yoko. PR stunts like the Bed In for Peace and the Naked

2 VIrgins solo album cover cause problems for the other Beatles.

  • The final straw happens when ATV music publishing, who owns

MacLen  music, the Beatles publishing arm  becomes a publicly traded stock.

McCartney on the advice of Lee Eastman buys as many shares of MacLen

music as he can. He does this without telling Lennon. When Lennon

finds out he blows up and threatens to quit the Beatles.

  • McCartney pleads with him to calm down and not make any announcement.

There would be no need to break up- just take a breather. Lennon agrees,

and 6 months later, McCartney surprises the other 3 by announcing he has

left The Beatles.

  • The band dissolves in April 1970, and pursues solo careers. Still, they

continue to work on each other’s solo projects and by the time of Lennon’s

death in 1980, most diffferences are resolved.

Beatles business: Still making money,

50 years on

Mark Koba

Published Fri, Feb 7 2014 9934 AM EST

Updated Fri, Feb 7 2014 9934 AM EST

Television host Ed Sullivan with the Beatles on the set of his variety

series on Feb. 9, 1964.

Express Newspapers | Getty Images

The Beatles earned a total of $10,000 from three performances on “The Ed

Sullivan Show” in 1964. A month before the 50th anniversary of their debut

on the show, theyʼre still making millions.

They could have gotten more for even a single performance on the popular

television show back, but their manager, Brian Epstein, negotiated a lower

sum for top billing and increased exposure.

He was right. The Beatles were the headliners for each program and got a

massive TV audience—including a then-record 73 million viewers for their

historic U.S. TV debut on Feb. 9, 1964.

That kind of thinking, combined with a relentless drive and vast musical

history, has kept the Beatles brand making money half a century after John,

Paul, George and Ringo took America by storm.

“Their financial impact today is bigger than any other artist, living or

deceased,” said David Fiorenza, a Villanova University economics professor

who specializes in art and entertainment.

“The surviving members and the groupʼs holding company continue to

search avenues that werenʼt available to them in the mid-1960s,” he said.

“Theyʼve always been on the cutting edge.”

The business legacy of the Beatles started immediately, said John Covach,

a rock historian who teaches a Beatles course at the University of


“The Gretsch and Rickenbacker guitars they used on Sullivan just flew off

the shelves the next day,” he said. “Kids wanted to be like them, from the

instruments to the haircuts.”

Thereʼs no question that Beatles music sells.

As of this year, the Beatles have sold 600 million albums worldwide—with

177 million sold in the U.S. alone, according to the Recording Industry

Association of America. Elvis Presley is second in the U.S., with 135 million


The group once held the top five spots on Billboard 100—in April 1964—an

achievement thatʼs likely to remain unmatched. They made $25 million in

earnings that year, which translates to almost $188 million today.

(

Apple Corps, the Beatles holding company controlled by Paul McCartney,

Ringo Starr and the estates of John Lennon and George Harrison, continues

to push out products.

In 1995, there was the release of the “Beatles Anthology” documentary,

along with the book and CD. A compilation of No. 1 hit singles from the U.S.

and U.K. was released as an album in 2000—and went to the top of the

charts. It became the best-selling album from 2000 to 2010.

Other deals include the “Beatles Rock Band” music video game, released in

2009—with multimillion sales—as well as the ongoing show “Love,” which

features Beatles music and performances by Cirque du Soleil in Las Vegas.

The TV show “Mad Men” paid about $250,000 for the rights to use the

Lennon-McCartney song “Tomorrow Never Knows” in an episode in 2012.

Also in 2012, after years of squabbles with Apple Inc. over naming and

music rights (the Beatles formed their company in 1968 for tax advantages;

the computer company was founded in 1976), the group finally allowed their

music to be sold on iTunes.

Thereʼs more repacking of Beatle albums in the works.

(

“Itʼs remarkable for a band that stopped recording in 1970, they still have

such interest,” said Darrin Duber-Smith, a marketing professor at

Metropolitan State University of Denver.

He said that what has helped the Fab Fourʼs staying power is being a first

mover. In marketing terms, that means they were the first in their category

and came to symbolize a significant moment in time.

“They represent the British musical invasion and the change in music that

came with it,” he said. “Weʼve had other moments, like with Pearl Jam and

Kurt Cobain, but nothing like the Beatles did for their time. They were a

transformative band, and that has longevity.”

Beatles merchandise in a shop in Liverpool, England

Getty Images

Of course, Yoko Ono aside, the business side of things helped end the

Beatlesʼ recording career.The death of Epstein in 1967 from a prescription

drug overdose sent the group, by their own admission, into a business


The resulting bickering over managing their financial affairs kept the band

members battling each other into the mid-1970s. It reached a point where

Apple Corps, once listed on the London Stock Exchange in the 1960s,

nearly dissolved in 1975. But it was kept on to manage the business aspect

of the Beatles recording library.

It turned out well, as Apple Corps ranked second in 2010 on Fast Company

magazineʼs list of the worldʼs most innovative companies in the music


Rumors of a Beatles reunion—and there were many—ended suddenly with

Lennonʼs murder in 1980. Twenty-one years later, George Harrison died of

cancer. But both continue to sell records, with Lennonʼs estate taking in

some $12 million in 2011 and Harrisonʼs $6 million that year.

McCartney and Starr still tour and make music headlines. Both are

scheduled to appear on the Grammy Awards on Sunday and will tape a

concert to help mark the 50th anniversary of their Sullivan performances.

Starrʼs worth is listed at around $300 million, making him the worldʼs richest

drummer. McCartney is said to have a net worth of $800 million.

There could be more money ahead for him and the Lennon estate in 2018.

Thatʼs when full rights to the Lennon-McCartney song catalog revert back

to the songwriters. Lennon and McCartney have received a percentage of

royalties over the last decades. Singer Michael Jackson outbid McCartney

in 1985 for the rights—paying nearly $50 million for them. Jackson later

sold half-rights to Sony for $95 million.

‘When was the bubble going to burst?ʼ

Interest in the Beatles only seems to grow.

“Weʼre having a Beatle specialty events the weekend of the anniversary of

their stay here,” said George Cozonis, managing director of The Plaza,

where the Beatles stayed for their first Sullivan appearance. “They became

part of The Plazaʼs history. We expect it to be packed.”

(Clarification:The Plaza said on Friday Feb 7, that it is not holding any

special events over the weekend but will mark the anniversary with a special

cocktail program.)

Covach said more than 20,000 people have registered for his next course

on the Beatles. “Itʼs incredible how people canʼt get enough of them,” he


The Beatles themselves were circumspect about their longevity, according

to Larry Kane, a former news anchor in Philadelphia and reporter who

covered the Beatles on their U.S. tours in 1964 and 1965.

“It was always a big question for them—when was the bubble going to

burst,” said Kane, who has written three books about the band. “I donʼt

think they had any idea it would go on like this.”

(Read more: Business lessons from rapper 50 Centʼs playbook)

But there was one among them who did.

“I asked Brian Epstein in 1964 how long it would last,” Kane added. “He

said, ‘Larry, the children of the 21st century will be listening to the Beatles.ʼ

He was right.”

—By CNBCʼs Mark Koba. Follow him on Twitter @MarkKobaCNBC.

  • Pilato explains his theory on the Michael Jackson purchase of The Beatles publishing.
  • Discuss the reunion in 1995 for THE ANTHOLOGY, and the new Beatle Tracks

such as FREE AS A BIRD.

Play RINGO soundbite about FREE AS A BIRD

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