– 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.
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