Seltaeb

• 1. Introduction

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  Seltaeb was a company whose name told you everything, if you knew how to read it: Beatles, spelled backwards. Set up in 1963 by a Chelsea socialite named Nicky Byrne, it was meant to turn the Beatles' exploding fame into money. Instead, it became the mechanism by which the most popular band in the world lost an estimated one hundred million dollars.

  The story begins not with grand conspiracy, but with a cocktail party, a blank line on a contract, and a lawyer's offhand advice that ten percent was better than nothing. It raises a question that dogs every artist who becomes a phenomenon: who is actually minding the money, and do they have any idea what they are doing?

• 2. The Cocktail Party Deal

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  Nicky Byrne had spent the first half of 1963 sitting around doing nothing, by his own account. He was 37 years old, a divorcé, an ex-Horse Guard trooper and amateur racing driver. He had dabbled in music publishing, clothes design, theatre production, and had managed the Condor club in London. He was part of a social set that called themselves the King's Road Rats. He had no experience whatsoever in merchandising or managing a large business.

  Brian Epstein's lawyer, David Jacobs, knew Byrne and encountered him at a friend's cocktail party. Jacobs was one of London's celebrity lawyers; his other clients included Liberace, Marlene Dietrich, Diana Dors, Judy Garland, Zsa Zsa Gabor, Laurence Harvey, the Rolling Stones, Laurence Olivier, and Stephen Ward of the Profumo affair. Jacobs offered Byrne the merchandising assignment on the spot, saying that Brian Epstein had made a terrible mess of it.

  Byrne was reluctant at first, then agreed. On the 4th of December 1963, he delivered the merchandising contract to Jacobs's office, leaving the percentage figure blank. Jacobs asked what number to write in. Byrne replied ambiguously: "Oh, look, just put in 10%." A typical commission for NEMS would have been 75% or 80%. Byrne expected Epstein to negotiate. The contract came back signed, without a single change.

• 3. The Scale of the Error

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  Epstein learned the dimensions of his mistake when Byrne handed him the first cheque, for $9,700. Epstein was impressed, until he asked how much Byrne was owed out of that amount. Byrne told him: nothing. That $9,700 was NEMS' 10%.

  Byrne charged the merchandisers a 10% commission for a licence, receiving ten dollars out of every hundred. He then gave 10% of that to NEMS, which worked out to one dollar. Epstein was horrified. He decided he could never tell the Beatles. Jacobs's advice at the time had been simple: ten percent is better than nothing.

  What Epstein had failed to grasp was the scale of American appetite for Beatles products. The Wall Street Journal predicted that American teenagers would spend $50 million during 1964 alone on wigs, dolls, egg cups, T-shirts, sweatshirts, and narrow-legged pants. The Reliant Shirt Corporation paid $100,000 for a single licence and sold over a million Beatle T-shirts in three days. Remco Toys had produced 100,000 Beatles dolls and had orders for another 500,000. The Lowell Toy Corporation was selling Beatle wigs at more than 35,000 per day, faster than the factory could make them.

  American businessmen compared the moment to the biggest marketing opportunity since Walt Disney created Mickey Mouse. The Columbia Pictures Corporation offered to buy Byrne's share in Seltaeb for $500,000, with Ferrari cars thrown in for every partner. Byrne turned it down.

• 4. Byrne's Operation

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  While Epstein was still digesting the terms, Byrne had already built an empire out of Park Avenue and Fifth Avenue. During the Beatles' first flight to the United States, Epstein was offered samples by merchandisers on the plane itself, clocks, pens, plastic wigs, bracelets, games. He rejected them all and directed the companies to Byrne, who was already in New York, ensconced in the Drake Hotel on Park Avenue at 56th Street.

  Byrne rented expensive offices on Fifth Avenue and hired two limousines on 24-hour standby, plus a helicopter to fly clients to and from the airport. He insisted that only the presidents of merchandising companies could meet with him directly, or with his partner, Peregrine Eliot, heir to the ninth Earl of St Germans, whose aristocratic title helped promote the company's name. Eliot would later recall going to the Seltaeb office once or twice a week simply to draw $1,000 from petty cash.

  Byrne had recruited five friends as partners, four of them unknown to either Jacobs or Epstein. Each had invested around $1,600. They were Mark Warman, Simon Miller-Munday, John Fenton, Peregrine Eliot, and Malcolm Evans, not to be confused with Mal Evans, the Beatles' roadie. Seltaeb licensed over 150 different items internationally, from Beatles dolls and scarves to mugs, bath water, bubble gum, liquorice, and empty cans of Beatle Breath.

• 5. The Legal Wreckage

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  Epstein managed to renegotiate the contract in August 1964, raising his royalty to 49%. But by then the damage extended beyond the original terms. Within the Seltaeb partnership, Peregrine Eliot sued Byrne for damages of $1 million. A report in The Times on the 9th of December 1964 detailed Eliot's accusations: that Byrne had spent $150,000 for his personal comfort and benefit, charged hotel bills to Seltaeb at as much as $19,000 a week for girlfriends, opened charge accounts for them in Fifth Avenue shops, and hired a chauffeur at $700 a week. Eliot also alleged that Byrne had withheld $55,000 in royalties owed to NEMS. Byrne denied most charges but admitted hiring the chauffeur, explaining he was unfamiliar with the streets of New York.

  Epstein accused Seltaeb of improper accounting and cancelled its licence-granting authority. Byrne countersued Epstein's New York accountant, Walter Hofer, asking for $5,168,000 in damages. The legal battle sprawled across 39 individual claims against NEMS and took three years to settle. Byrne won. Epstein paid the court costs and legal bills personally, though the judgement was later vacated.

  The collateral damage was devastating. Woolworth's, Penney's, and other large companies refused to finalise any merchandising agreements while the case was active, cancelling orders worth $78 million. The entire episode was estimated to have cost NEMS and the Beatles approximately $100,000,000.

• 6. Aftermath and Reckoning

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  Epstein launched Maximus Enterprises Ltd. in 1967 to try to recover some ground in the merchandising market. He was too late. So many companies had withdrawn their interest in the wake of the Seltaeb dispute that the opportunity had passed. John Lennon's remark that the Beatles were more popular than Jesus had further alienated potential partners in America's Bible Belt.

  Epstein feared the Beatles would discover the truth about Seltaeb when their management contracts came up for renewal in the autumn of 1967. He died on the 27th of August 1967, from what was ruled an accidental overdose of a prescribed drug, before that confrontation could happen. David Jacobs was found hanged in his garage on the 15th of December 1968. In the days before his death, Jacobs had asked for police protection, telling a private detective, "I'm in terrible trouble, they're all after me," and naming six well-known showbusiness people.

  Lennon later reflected that Epstein had ripped them off on the Seltaeb thing. Paul McCartney offered a more resigned assessment: Epstein had looked to his father for business advice, and his father knew how to run a furniture store in Liverpool. Epstein's assistant, Alistair Taylor, put it plainly: there were no rules. Everyone was making it up as they went along. The industry that had already grossed $20 million for Elvis Presley in 1957 alone held no obvious lessons for the people managing the Beatles. Nat Weiss, the prominent divorce lawyer Epstein later asked to oversee the Beatles' merchandising affairs, said simply: the Beatles never saw a penny out of the merchandising. Tens of millions of dollars went down the drain.