Virgin King (Text Only)

Proof of the fall in the magazine’s morale could be seen in its in-house magazine. As if it was not enough of a struggle to put the next issue of Event together, a group of mischievous members of the magazine’s staff decided to start an underground gossip sheet, entirely for internal consumption, that would chronicle its lurching progress from issue to issue. The sheet was called Non-Event, Rod Vickery, usually one of Branson’s most faithful lieutenants, did the artwork, while another couple of employees wrote the stories and a fourth ran off a copy for the desk of each member of staff. Terry Baughan, the man in charge of the Virgin Group’s finances at the time, was at first speechless with fury. ‘I’d love to get my hands on the people who did that,’ he said. Vickery, kept safe from suspicion by virtue not only of his long service but also of his seniority in the company, said nothing.

The tough decisions forced on Branson by the tottering fortunes of his magazine turned Event’s journalists against him. Jonathan Meades, one of the later editors he appointed, recalled that Branson had disputed a £30 expense claim submitted by the magazine’s film critic. ‘But he also had three phones going at the same time, and on one of them he was trying to sign the Stranglers for £300,000,’ Meades remembered. The experience of working for Branson also left him with a jaded impression of the young entrepreneur. ‘He’s impossible to conduct a conversation with because he is inarticulate … Branson’s very good at making money, but the rest of him hasn’t kept up. It’s like a form of autism.’

But Branson was never one to give up. With creditable bravado, he telephoned Elliott six months later. Brushing aside Elliott’s questions about the restyles and the firings at Event, Branson came straight to the point.

‘Look,’ he said. ‘We’ve had a really good run with the Human League. We’ve done really well, and I’ve got at least three-quarters of a million pounds sitting in the bank. I can either put it into Event, or I could put it into Time Out.’

Elliott, who was a little drunk at the time, took a deep breath before he responded.

‘Richard,’ he said. ‘There’s one thing you don’t realize. You should stop this mission to acquire all or part of Time Out. At the end of the day, my readers don’t respect you. They see you as an opportunist, as someone without genuine cultural integrity.’

Cultural integrity he may have lacked; but Richard Branson had an almost unlimited capacity to swallow failures and humiliations. ‘Business opportunities are like buses,’ he liked to say. ‘There’s always another coming along.’ And so with barely a pause for self-doubt, Branson plunged back into the daily concerns of his record business, his ability to sniff out a good deal heightened by the awareness that Virgin’s losses on Event had brought it perilously close to insolvency. It was not to be long, however, before Branson’s thoughts had returned to publishing. If he was not cut out to be a magazine proprietor, why should he not own a film company? A video production business? A cable television company? A radio station? The thought may even have crossed his mind, albeit briefly, of owning a newspaper.

Unfortunately, the early omens were not good. Branson already owned one publishing business, known as Virgin Books, and it was not going well. He had received an approach in 1979 from a man called Maxim Jakubowski, whose main area of expertise was in the food industry but who fancied himself as a publisher of books. But Jakubowski was not as successful a publisher as he was a negotiator; and in less than two years, it had become clear that Virgin Books was in trouble. Among the weird ideas he had put into practice was a series of short novels written by rock stars; at one stage he even wanted to publish a book about chickens that had appeared in the movies. But the company’s core problem under his stewardship was that it was trying to do too many things. Unable to choose even between fiction and non-fiction, Virgin Books was a small and not very successful publisher. In an ill-advised interview with the Financial Times, Branson had boasted that the company would publish books by undiscovered young talents, and would be looking for the literary equivalent of Mike Oldfield. It never found it.

Even before relations with Jakubowski began to deteriorate, however, Branson realized that he needed to bring someone into the publishing company whom he could trust. He knew exactly whom to ask for advice: his younger sister Vanessa’s boyfriend, Robert Devereux, who worked at Macmillan, one of the grander names in British publishing. Devereux was twenty-five years old, and very bright indeed. He also had the tactical advantage of having beaten Branson regularly at chess. A lunch was arranged on the houseboat to which Devereux brought with him Rob Shreeve, his boss at Macmillan. Branson put his proposal: the two men should come to Virgin and sort out its books business. Shreeve, older and perhaps a little wiser than Devereux, wanted to know just how committed Branson was to his book publishing division. How much money did he think he would be able to invest in it? How many titles might it expect to bring out over the coming year? Whatever the answers were, it became clear that Devereux would join Virgin; Shreeve, though grateful for the lunch, would politely decline.

Devereux moved fast on his arrival at Virgin Books. He fired some of the staff, and frightened others into working harder. He threw out Jakubowski’s strategy, and tried to decide how the small publishing company he was now in charge of should seek to compete against the corporate giants. Devereux’s first major decision was to stop publishing fiction. Instead, he ruled that the firm should concentrate on quick, preferably cheap, books that would appeal to young people. While the rest of the publishing world was going collectively mad, paying huge advances to a small number of star authors that could never be recouped in royalties, Devereux preferred to think small. He was successful. Virgin Books stopped losing money; over the coming few years it began to acquire a reputation as a serviceable publisher of books about rock, sport and video games.

But Devereux could not satisfy his ambitions by staying the managing director of a small publishing house. He wanted more responsibilities inside the Virgin Group, and with the help of Richard Branson, who had become his brother-in-law when he married Vanessa Branson, that was what he got. Branson’s closest advisers, Simon Draper and Ken Berry, viewed Devereux with polite suspicion when, still under the age of thirty, he joined the board of the Virgin Group. ‘We all liked him and were very impressed by him,’ recalled Draper, looking back on his feelings during the 1980s. But Devereux seemed to be trying to out-Branson Branson. ‘He thought, “I can play bridge better than Richard, I can play sport better than Richard, I can be Richard.”’ To Draper’s mind, Devereux’s self-appraisal was wrong. What Devereux lacked, for all his cerebral qualities, were his brother-in-law’s uncanny ability to inspire not merely great loyalty but also enormous effort among those who were working for him.

Those who were sceptical of Devereux’s abilities felt they had been proved right when he persuaded the board to take a 20 per cent shareholding in W. H. Allen, a publishing company that had lost its market edge. Having merged Virgin’s publishing interests into the firm, and then invested substantial Virgin funds in Allen, Devereux then allowed the existing management to carry on running it – and it was not long before Virgin was required to take a controlling stake in the company, cut out most of its unsuccessful operations, and write off substantial losses.

The company’s forays into film-making were only marginally more successful. Robert Devereux and Al Clark, the company’s erstwhile press officer and Events editor, made a little money for Virgin by topping up the finance of a couple of low-budget films, one called Secret Places and the other Loose Connections. They went on to put £4m into Electric Dreams, a high-tech love story directed by Steve Barron, a maker of pop videos. The film, whose soundtrack included a number one hit from the Human League’s vocalist Phil Oakley, produced a modest return for Virgin, made more attractive by the fact that under specially favourable tax treatment for investing in British films, the Inland Revenue allowed Virgin to deduct its entire investment in the film from its taxable income for the year. But Virgin seemed somehow unable to leave this small but successful division where it was. The next project, brought to Virgin by Simon Perry, the producer of Loose Connections, was to turn George Orwell’s novel of Stalinist totalitarianism, Nineteen Eighty-Four, into a film. It was not the first time a film of the book had been made; thirty years earlier, in the optimism of a fast-growing postwar society, a sanitized version with a happy ending had been put out. But there would be special resonance to releasing the film of Nineteen Eighty-Four in 1984. It would cost just under £2m, and the director would be Michael Radford, Perry’s partner.

When the proposal was brought to him, Branson agreed to back the film. John Hurt and Richard Burton were lined up to star in it. Before shooting could commence, however, Virgin received a piece of bad news: the film was going to be a little more expensive than its makers had expected. Instead of £2m, Virgin should now expect to stump up £2.5m. So convinced was Branson that Perry and Radford were going to pull off a masterpiece that he was bid up to £3.7m, and then, as the film continued astonishingly to overrun its shooting schedule and its budget with equal abandon, to £5.5m The meeting at which that figure was first mentioned in Branson’s hearing was a difficult one.

Still Virgin and its chairman appeared to be dazzled by the glamour of the movie business. Instead of doing what most investors would have done – sacking the producer and director, and replacing them with a pair of placemen who could be relied on to get the film in the can and then distributed with as small a loss to the backers as possible – he allowed Perry and Radford to finish off the project. But the greatest disagreement was still to come. In the hope of making the film a commercial success, Branson had arranged for the Eurythmics to produce a soundtrack. The music they came up with, assembled with breathtaking speed in a Caribbean studio while the band were serving out their required number of days of tax exile, was an impressive piece of soundtrack, but it seemed to have little connection with the movie. Perry and Radford insisted that they should use a soundtrack already written by Dominic Muldownie, which they considered far more suitable. If Branson did not agree, they said, he was welcome to distribute the film with whatever soundtrack he liked; but they could not be expected to talk of it as their own.

Faced with this threat, Branson looked for a compromise. The Muldownie soundtrack was used for the reviewers and the premiere; once the film was on general release, however, it would be replaced by the work of the Eurythmics – provided market research supported the view that audiences did not actually object to the more commercial rock soundtrack. In November 1984, a month after the film’s release, Radford took the opportunity of giving an acceptance speech for an award for best British film of the year to attack Branson’s company for having ‘foisted’ the Eurythmics soundtrack on him. That was embarrassing enough; Perry them compounded the sin by giving an interview to a gossip column in the Daily Express, in which he blamed Branson’s inability to sell the film in the United States on his ‘inexperience’, and threw in an accusation of lying for good measure. Branson threatened to sue for libel.

The small satisfaction was that Perry and the newspaper caved in quickly, apologizing and withdrawing the allegations, agreeing to pay Branson’s costs as well as their own, and making a donation to charity. But for Branson, the losses he made on the film came with an important lesson. Never again would he be tempted to set aside his own commercial interests for the sake of backing a director who wanted to make a masterpiece. In media businesses – whether records, books, films or magazines – the proprietor had to stay a little aloof from the product. Once he became too swept up in the creator’s enthusiasm, his financier’s judgement was sure to suffer.

FIVE

Do You Really Want to Hurt Me?

IN PRINCIPLE, there was no dispute between Richard Branson and Nik Powell about how they should respond to the harsh economic conditions of 1980. But the two men had different pet projects. In 1978, Branson bought a private island in the British Virgin Islands for $300,000 from a cash-strapped English aristocrat. He then spent nearly £1m buying two clubs: the Roof Gardens in Kensington, and Heaven, a nightclub near Charing Cross that was the largest gay club in Europe. Powell, by contrast, had been the leading light behind a plan to spend a similar sum on converting a cinema in Victoria into The Venue, a combination of restaurant, bar and concert place.

These two interests were a source of conflict: Powell complained that the island was an indulgence, and feared (incorrectly as it turned out) that the two clubs Branson had acquired might not make money. For his part, Branson felt that the Venue made demands on their time that were disproportionate to its importance to the Virgin Group. Everything there seemed to be a problem. Planning permission came only at the last minute, and Branson himself was forced to intervene to get even trusted members of staff to sell tickets for performances there. The waiting staff were paid very low salaries, and had to be placated at Christmas for the absence of an expected bonus with individual presents wrapped up by Nik Powell and Barbara Jeffries, the Venue’s manager at the time. The working conditions there brought bad publicity to the group when Private Eye began to run articles claiming that the Venue’s waiting staff and the bands who performed there were being exploited, and that recipients of free tickets were being denied entrance when the club finally began to fill up. And as if these problems were not enough, it was realized in late 1980 that no proper arrangements had been made for paying tax on staff salaries. Chris Craib, one of the group’s senior accounting staff, had to make an impromptu return to the Inland Revenue, estimating the tax that he believed should have been paid over recent months but had not.

Beneath the blazing rows that Branson and Powell had over these difficulties, there was an underlying issue of far greater importance. Nik Powell’s influence in the group had been waning over the past five years. The retail businesses in which he took greatest interest had proven to be indifferently managed and barely profitable; the record label, with which he had little to do, was the engine of Virgin’s growth. Richard Branson had begun to confide more in Simon Draper and in Ken Berry than he did in Nik Powell. Branson had come to believe that for all Powell’s talents, there was no longer an important job for him to do at Virgin.

The recession of 1980 made matters far worse. For while the triumvirate at the top of the music businesses still felt that he was not pulling his creative weight, Powell’s ability to block decisions he disagreed with suddenly became much greater. No longer was Virgin expanding so rapidly that his concerns could be dismissed; instead, Powell himself was the butcher who was making the cuts, and Virgin was shrinking. As a 40 per cent shareholder in the Virgin holding company, Powell could stop Richard Branson from taking steps he did not approve of. And Branson, who had resisted all attempts to control him – at school, at home, and in his marriage to Kristen – did not like being subjected to this veto.

Branson would later say that it had taken him two years to summon up the courage to write the letter. Nik Powell, after all, was his childhood friend; the man who had dropped out of university to join him in Albion Street; the junior partner in the relationship that they both referred to as a ‘marriage’. But in the end there was no choice. Branson wrote to Powell, telling him that he thought the two should separate.

The weakness in Powell’s position was that although he had a 40 per cent shareholding, his contract with Branson was far from powerful. The key point in the agreement was the calculation that would be used to work out how much Powell’s shares were worth if he decided to sell them back to Branson. Branson would later recall that the calculation was based on the company’s net assets. With the help of his South African brother, Draper had been far more canny; he had insisted on a valuation based on a multiple of pre-tax earnings over earlier years. But the price of Powell’s shareholding was based on Virgin’s net assets as recorded in the company balance sheet. This may have included buildings and cars, tables and chairs. But it excluded the intangible asset that was a decade later to allow Branson to sell the Virgin music businesses for £56001: the Virgin catalogue. The contracts that Branson had signed with the artists – specifying the number of records that each one would have to deliver to Virgin in the future, and the length of time for which Virgin would be able to collect copyright fees on the work that the artist had already done – were the real jewel in the Virgin crown. Yet they were not reflected in the company’s balance sheet; nor, therefore, were they reflected in the sum of money that Powell received when he and Branson parted company.

Neither Branson nor Powell would discuss the settlement in detail publicly. But Powell probably received £1m in cash, plus three assets he wanted to take with him: the Scala cinema, the video editing facilities that Virgin had invested in – and Steve Woolley, a man who knew backwards the film industry in which Powell thought he saw his future.

One million pounds must have seemed a fantastic sum to Powell in 1981. But he could not escape the fact that he had sold out to Branson when Virgin’s fortunes, and hence its value, were at a nadir. Within a couple of years, the new acts that the record label had already taken on, such as Phil Collins and the Human League, would make the group highly profitable once again. Within five years, the 40 per cent that he had sold back to Branson would be worth £96m. Although Powell publicly pronounced himself quite satisfied with the deal, he would have been forgiven for having regrets.

Powell’s friends admired his equanimity: he had become a Buddhist, and managed to curtail his frustration at the increasing friction with Branson during the dying months of their partnership by chanting regularly. But they were convinced that he had lost out all the same. ‘It seemed to me to be an unrealistically small settlement for 40 per cent of such a vast, thriving company,’ wrote Sandie Shaw, a chart-topping singer who later became his wife, ‘but Nik, who considered Virgin to be his “baby”, was highly emotionally charged about leaving it, and was not capable of making rational decisions.’

‘After Nik’s departure,’ Shaw continued in her autobiography, ‘his existence and role within Virgin was systematically written out of its history. The impression given, if any, was that Nik had been some kind of managerial employee.’

Branson defended himself furiously against the allegation that he had treated his boyhood friend unfairly. ‘I can see how it could be said that I eased Nik out at a time when the business was down, so it was easier to make him look bad and [to set a] lower price to buy him out … It was obviously very difficult because of our friendship … The money he received fairly reflected the input he had made. It was difficult for him to find a role to contribute. With Simon and Kenny and others there was really no role for him. He had no particular skills to contribute to the company as it was at that stage.’

Branson also claimed that the subsequent rise in the value of the record company was hard to predict. He pointed out that a few years later, Virgin bought Charisma Records, an independent label that had a fat catalogue including work by Genesis, Peter Gabriel and Monty Python, for only a few million pounds: ‘The contract that I gave Nik originally gave him his shares for nothing but stipulated that when they were sold they were to reflect a minority stake in a private company … he was not selling control. Therefore I believe the price paid at the time was a fair one. I had also agreed to leave him with a small profit share for the future which he decided not to take and to swap for something else.’

After a decade in which the two men spent hours of every day in each other’s company, the separation was very sudden. Nik Powell went off to found Palace Pictures with Steve Woolley, and was responsible for a number of successful films during the 1980s, including Company of Wolves, Mona Lisa, and latterly The Crying Game. Almost exactly ten years after his departure, however, Palace ran into financial difficulties and Powell came back to Branson, cap in hand. Virgin invested some money in the company, allowing it to continue in business for a few crucial months. When Powell returned a second time, however, Branson turned him down in the friendliest possible way: he asked him to go and see Robert Devereux, his brother-in-law, who was by then responsible for Virgin’s film and other media interests. Devereux took a hard look at the Palace books and decided not to invest. Branson consoled himself with the thought that Polygram, the large European record company, were about to take a substantial stake in Palace. But Polygram were interested only in the company’s production arm. By May 1992, Palace had gone into administration, and Powell was forced to start again for the second time in his career. ‘I don’t think we realized how close he was [to going under] at the last minute,’ said Richard Branson afterwards.

‘I gather,’ said the headmaster sternly, looking down his nose through his spectacles at the school’s morning assembly, ‘that some of you are not entirely happy with the musical selections that we’ve been playing. So today we have a slight change in the usual programme. Instead of classical music, I have decided to offer you something a little different.’

The headmaster stepped to one side. A powerful spotlight picked out a circle in the centre of the curtains behind him. The curtains opened. And eight hundred primary school pupils, aged from five to twelve, jumped out of their seats in astonishment and began to scream. Not in their wildest dreams had they expected Boy George himself to perform a number-one hit song, at their school assembly.

Behind the scenes, Steve Lewis gave a smile of quiet satisfaction. He had been at the school since seven o’clock in the morning, helping to supervise as the roadies and technicians assembled the loudspeaker system, and watching as curious teachers peeked into the classroom where George, his make-up already applied, was ironing the shirt that he was about to wear. The ‘concert’, if that was the right word for a performance of a single song at a school in Finchley, was an outstanding success.

It had been set up for a television programme – ‘Jim’ll Fix It’ – and filmed by hidden cameras. Two girls from the school had written in to Jimmy Savile, complaining about the miserable diet of Schubert and Shostakovitch to which their miserable headmaster subjected them at every morning assembly. Long after the girls had given up on their request, the programme’s producer at the BBC had telephoned Virgin Records, just on the off-chance that the world’s most famous pop star might be willing to co-operate in bringing the girls’ fantasy to fruition. He was; the idea tickled his fancy, and his manager and his record company recognized that although he would receive no fee for his performance, the exposure to a television audience of millions of children and adults would help to sell records. The faces of the astonished children – most notably the two who had sent in the letter, who had been identified for the cameraman from school photographs so that viewers could see their disbelief as their dream came true – turned the concert into brilliant television. The only irony was that Boy George, a consummate professional performer who had played all over the world, sometimes to audiences of tens of thousands of people, was more nervous about playing in front of a school assembly than he had ever been before. Only when the curtains opened did the star begin to enjoy himself.