No One Warned Him About Self-Sabotage.

“The music business is a strange combination of having real and intangible assets. Pop bands are brand names in themselves. At different stages in their careers, their name alone can practically guarantee hit records. It’s also an industry where the very few successful bands are very, very rich, and the bulk of bands remain obscure and impoverished. The rock business is a prime example of the most ruthless kind of capitalism.”

– Richard Branson, Losing and Finding my Virginity: The Full Story

Last week on Methods of Prosperity:

Virgin Mail Order faced a crisis with no way to send records or receive payments. Postal workers were on strike. To avoid running out of money in a week, Richard Branson decided to open a physical record shop. He had no experience in running one. He found a location on Oxford Street in London. The building’s owner sold shoes out of the storefront. The owner agreed to provide the upstairs space for free. The arrangement would attract customers for both businesses. Within days, Virgin’s first record store opened. It drew significant foot traffic and built a loyal customer base. By spring 1971, the shop was £15,000 overdrawn. Branson exploited a tax loophole, allowing him to avoid paying export taxes. His plan was to repay debts from the proceeds. It was a criminal plan. He thought he would get away with it. He didn’t.

Part 54. Sir Richard Branson (continued).

You can find this week’s TL;DR here.

Key Lessons:

• Your reputation precedes you.

• Be careful what you wish for.

• Reinvent convention.

• Be informal.

Now there’s a collectible version of this newsletter! Methods of Prosperity newsletter number 17 is available to collect as of June 20, 2024. If you’re so inclined you can permanently own it!

“Are you Richard Branson?”

There were seven or eight intimidating men at the door of his warehouse.

“We’re Customs and Excise, and we’ve got a warrant to inspect your stock.”

They couldn’t find any incriminating evidence there. Richard had hidden the records. They were in his Liverpool shop. What he didn’t know is that Customs and Excise found them.

British customs officials arrested Richard. They charged him on section 301 of the Customs Excise Act, 1952. He spent that night in a cell.

Years earlier, his headmaster made a prediction. Richard attended Stowe School located in Buckinghamshire, England. The headmaster’s name was Bob Drayson. Richard dropped out of school at age 16. Bob Drayson told him, “I predict you will either go to prison or become a millionaire”.

The first part of his headmaster’s prediction had come true.

Ever since that night, Richard Branson made up his mind that he would never again break the law. He vowed to himself never to do any business deal that would hurt his reputation.

His mother bailed him out of jail. It cost her £30,000. She put up the family home as security.

Over the summer of 1971, Richard negotiated an out of court settlement. He agreed to pay £15,000 immediately. Then, over the next three years, three installments of £45,000. It was three times the illegal profit Virgin would have made. If he paid it off, he could avoid a criminal record. They would arrest Richard and put him on trial if he failed to pay.

To make Virgin Records a success, Richard would have to work twice as hard. Avoiding prison was the most persuasive incentive. From that moment he concentrated on expanding the record shops. Virgin Records used every penny earned at the shops to open up another shop. In turn, that was another pound put towards paying off his debt to Customs and Excise. He repaid his mother for the bail she put up for him. Three years later he was able to pay off everything.

While the record shop was informal, the recording studio system was formal. Bands had limited time slots to record. Studios were often overbooked. Can you imagine? What if it were The Rolling Stones? Straight after finishing their bowls of Corn Flakes, it’s time to record Brown Sugar. That was ridiculous. The best environment for making records would be a big, comfortable house in the country. This was a new concept.

Richard Branson bought the manor house in Shipton-on-Cherwell, Oxfordshire, in 1972. With 15 bedrooms, it’s too big for a family home. It’s too small to be a hotel. It’s perfect for a recording studio. He paid £30,000. The mortgage was £20,000. He collected the rest from his family. Richard converted it into a recording studio called The Manor Studio. He launched Virgin Records that same year.

The label’s first release was Mike Oldfield’s Tubular Bells in 1973. New Musical Express (NME) described it as “an amazing piece of music which could only have been made by a madman or a genius.” On May 29, 1973, John Peel played the first side of Tubular Bells on his BBC Radio 1 show, Top Gear.

He announced, “Tonight, I’m not going to play a whole lot of records. I’m just going to play you one: a young composer called Mike Oldfield. It’s his first record, and it’s called Tubular Bells. I’ve never heard anything like it in my life. It’s released by Virgin, a brand new record label. And it was recorded at Virgin’s own studios in Oxfordshire. You’ll never forget this.”

John Peel continued his praise of Tubular Bells, “On the all too frequent occasions when I’m told that a record by a contemporary rock musician is a work of lasting importance, I tend to reach for my hat, and head for the wide open spaces. Today, these experts would probably tell you that in twenty years time, collectors will still be enthusing over the records of such weighty bands as Yes, and Emerson Lake and Palmer. I’m raised to bet you a few shillings that Yes and ELP will have vanished from the memory of all but the most stubborn. And that the Gary Glitters and Sweets of no lasting value will be regarded as representing the true sound of the 1970s. Having said that, I’m going to tell you about a new recording of such strength, energy, and real beauty, that, to me, it represents the first breakthrough into history that any musician regarded primary as a rock musician has made – Mike Oldfield.”

Virgin Records arranged one concert for Mike Oldfield. It was a big event scheduled on June 25, 1973. This was the premiere live performance of the album, held at the Queen Elizabeth Hall in London. The concert featured various accomplished musicians, including Mick Taylor of The Rolling Stones. Sold tickets and television coverage made backing out a liability for Virgin. On the day of the concert, Mike panicked. He visited Richard on his houseboat. He didn’t want to go through with it. Mike Oldfield was on the verge of success and couldn’t handle it. Petrified, Mike Oldfield was backing out.

To be continued…

I like you,

– Sean Allen Fenn