Business Movers: Virgin Territory – Richard Branson’s Business Beginnings | Growing Pains | Episode 3 Summary

Hosted by Lindsey Graham for Wondery

Introduction

In the third episode of Business Movers, hosted by Lindsey Graham, the spotlight is on Richard Branson's early endeavors in establishing Virgin Records and Virgin Music. This episode delves into Branson's tumultuous journey marked by legal challenges, strategic hires, ambitious expansions, and bold partnerships that shaped the foundation of his burgeoning empire.

Richard Branson’s Legal Hurdle and Settlement ([00:00])

The episode begins in June 1971, introducing a young Richard Branson grappling with the repercussions of a tax evasion scheme. At just 20 years old, Branson faces significant financial strain after being caught exporting records to Belgium to dodge British sales tax. As he navigates the legal fallout, Branson's lawyer negotiates a settlement where he agrees to pay £60,000 over four years, averting court prosecution and maintaining his clean criminal record.

Branson (00:45): "I don't have that kind of money."

This settlement not only underscores Branson's precarious financial situation but also sets the stage for his relentless drive to make Virgin Records a success.

Hiring Simon Draper: A Strategic Move ([07:15])

Seeking to bolster his business acumen, Branson meets his distant cousin, Simon Draper, at a London restaurant. Draper's profound knowledge of music and passion for the industry convince Branson to appoint him as Virgin Records' new record buyer. Draper's expertise leads to a significant overhaul of Virgin's music catalog, emphasizing quality over quantity.

Draper (09:30): "I wear that badge with pride. Well, good, because that's exactly the vibe we're going for."

Draper's strategy involves sourcing unique albums and eschewing mainstream singles, aligning Virgin Records with discerning music enthusiasts and establishing a distinctive brand identity.

Ambitious Expansion Plans and Initial Challenges ([14:50])

Buoyed by increasing revenues, Branson ambitiously plans to expand Virgin Records by opening one new store each month throughout 1972. However, financial constraints pose a substantial hurdle, as profits from the flagship Oxford Street store are siphoned off to repay Branson's tax fines and fund the transformation of Shipton Manor into a recording studio.

To mitigate costs, Branson adopts a savvy approach by negotiating reduced rents and securing three months of free rent for each new store. This tactic facilitates rapid expansion without overextending financially. By March 1972, Virgin Records proudly inaugurates its first store outside London in Liverpool, a city with a rich musical heritage.

Branson (13:20): "That's the powerful backing of American Express."

However, the Liverpool store initially dazzles with high foot traffic, quickly tapering off as the store devolves into a chaotic environment reminiscent of a house party. Recognizing the drift from Virgin’s intended brand, Branson implements operational changes—enhancing lighting, reorganizing cash registers, and enforcing store policies—to restore professionalism and boost sales.

The Triumph of 'Tubular Bells' and Virgin Music's First Hit ([18:40])

The narrative shifts to 1973, highlighting Virgin Music's groundbreaking release: Mike Oldfield's Tubular Bells. Branson's partnership with Island Records under unconventional terms—handling promotion and distribution independently—positions Virgin to reap substantial profits from the album's success. Despite the absence of upfront payments, Branson's aggressive promotion strategy pays off when renowned BBC radio host John Peel lauds the album on air.

John Peel (24:05): "I've been introducing Top Gear for nearly six years now, but I think that that is certainly one of the most impressive LPs that I've ever had the chance to play on the radio."

Tubular Bells becomes a phenomenal success, catapulting Virgin Music into profitability with sales exceeding $10 million (adjusted for today's values). This landmark achievement not only funds Branson's financial obligations but also validates his vision for Virgin as a formidable player in the music industry.

Struggles to Sign Major Artists and the Shift to Punk Rock ([23:15])

Emboldened by the success of Tubular Bells, Branson endeavors to secure bigger names to sustain Virgin Music's momentum. Despite generous offers, iconic bands like The Who, Pink Floyd, and 10cc decline to join Virgin, perceiving the label as inexperienced despite its recent triumph. Undeterred, Branson sets his sights on the rebellious Sex Pistols, a band notorious for their disruptive antics and cult status.

Partnering with the Sex Pistols: A Risky Gamble ([27:50])

In 1977, Branson's pursuit culminates in signing the Sex Pistols, managed by the equally infamous Malcolm McLaren. This partnership thrusts Virgin Records into the heart of punk rock's raw and unpolished energy. The release of "God Save the Queen" epitomizes this alliance, staging provocative stunts aimed at destabilizing societal norms and garnering intense media attention.

McLaren (31:10): "You want us to behave, right? Become good little choir boys. Maybe we should start banging those tubular bells of yours."

The controversial release and subsequent legal battles over the album title Nevermind the Bollocks generate substantial publicity, driving sales to over 1.5 million copies. However, the band's internal turmoil and eventual breakup signify that the initial success may not herald long-term stability for Virgin Music.

Legal Challenges and Public Relations Triumph ([28:30])

Virgin Records faces legal scrutiny when a store manager is arrested for promoting Nevermind the Bollocks. The ensuing court case tests Branson's resilience, culminating in a favorable verdict that protects the label's freedom of expression and bolsters its rebellious image.

Judge (30:50): "Virgin had done nothing wrong."

This legal victory not only vindicates Virgin's bold branding but also solidifies its reputation as a fearless and innovative label willing to challenge the status quo.

Reflecting on the Future and Expanding Horizons ([31:00])

Despite the successes, the fleeting nature of punk rock's popularity and the dissolution of the Sex Pistols prompt Branson to contemplate diversifying beyond music. Recognizing the need to innovate continually, Branson strategizes on leveraging the Virgin brand's versatility to explore new industries, setting the stage for future ventures beyond the music business.

Conclusion

Episode three of Business Movers intricately charts Richard Branson's early challenges and triumphs in building Virgin Records and Virgin Music. Through strategic hires, audacious expansions, and a willingness to embrace controversy, Branson lays a resilient foundation for his business empire. However, the episode also underscores the volatility of the music industry and the necessity for continuous evolution—lessons that Branson takes to heart as he contemplates expanding the Virgin brand into new territories.

Notable Quotes:

• Richard Branson ([00:45]): "I don't have that kind of money."

• Simon Draper ([09:30]): "I wear that badge with pride. Well, good, because that's exactly the vibe we're going for."

• John Peel ([24:05]): "I've been introducing Top Gear for nearly six years now, but I think that that is certainly one of the most impressive LPs that I've ever had the chance to play on the radio."

• Malcolm McLaren ([31:10]): "You want us to behave, right? Become good little choir boys. Maybe we should start banging those tubular bells of yours."

• Judge ([30:50]): "Virgin had done nothing wrong."

For those intrigued by Richard Branson's entrepreneurial spirit and the genesis of Virgin Records, this episode offers a compelling exploration of ambition, risk-taking, and the relentless pursuit of innovation.