4 - The Buried Secrets of Northern Songs
4 - The Buried Secrets of Northern Songs
Northern Songs was created in early 1963 to collect the publishing royalties to Beatle songs. The income from the songwriting royalties was paid exclusively to McCartney and Lennon and was not part of the revenue stream of Northern Songs.
The initial share capital was 100 shares at one pound each. The largest shareholders were Dick James (the music publisher) with 25% and someone called “Charles Silver,” 25%. McCartney and Lennon each got 20% of the shares, and10% went to Brian Epstein.
Silver’s role in the company is a mystery. He is said to have financed Dick James to establish “Dick James Music” in 1961. It is not known if Silver actually invested any money in the creation of Northern Songs, or, if he did, why he would even need to as music publishers require very little capital as it is a service-based company? As Dick James received 10% off the top of any revenue as an “administration” fee, this would have covered any general expenses.
Why Epstein would receive any shares in this new corporate entity has never been explained. He must have told McCartney and Lennon that as he was entitled to 25% of their income from song publishing according to the management contract they signed with him in 1962. If the two songwriters received, combined, 40%, 25% of that would be 10%.
Only when the company went public in February 1965 did George and Ringo receive a paltry 0.8% of the shares of the company. They received nothing for the “songwriting” royalties that only Lennon and McCartney got from 1963 until this very day, even though it was in large part their musical contributions that gave these songs commercial value.
Why did the regulators allow Northern Songs to go public?
In February 1965, a very unusual transaction took place. Northern Songs went public on the London Stock Exchange.
Every account of Beatle history reports that the initial idea to take Northern Songs public was because “they were paying too much tax.” Yet the only tax benefit is that they would not have to pay capital gains on the stock they sold to the public. This “tax benefit” didn’t apply to any of the income from royalties from record sales, merchandising or performances. McCartney and Lennon’s songwriting and publishing revenues were just one part of their entire revenue stream.
Five million shares were issued at 25 pence each giving the company a pre-IPO valuation of 1.25M pounds. Two million shares were sold to the public at a price of 39 pence - thus giving the company valuation after the IPO of nearly 2M pounds.
The February 27th, 1965 issue of the trade publication Billboard provides the background of the general atmosphere prior to the IPO:
The London Stock Exchange has been harshly criticized in the world of finance for allowing Northern Songs to have its shares quoted on the stock market. The company has been in existence for two years and normally it requires financial statements for five years. Virtually every analyst advised against buying the stock.
Question: why did the financial market regulators allow Northern Songs to carry out an IPO? This very small company didn’t meet the necessary requirements as a going concern for five years in order to tap into the public capital markets?
Enter James Isherwood and Lord Goodman
McCartney tells this story in his 1997 autobiography Many Years From Now. Isherwood is Brian Epstein’s accountant who is credited as coming up with the idea to float Northern Songs in the first place.
It was, however, an ambitious scheme because no one had ever done anything like this before and Isherwood was not sure that the Stock Exchange would even accept a company whose income consisted solely of music written by two young men with no proven track record: what if they dried up, what if they argued, what if they veered off in a non-commercial direction or, even worse, what if one of them had an accident or died? Every merchant bank that Isherwood approached refused even to consider the idea of supporting an application to the Stock Exchange.
Isherwood went to Lord Goodman, who was known to Private Eye magazine as 'two dinners Goodman', who had risen to power along with the Labor Party hierarchy when Labor won the 1964 election. Goodman acted for Prime Minister Harold Wilson and represented a number of powerful, wealthy Labor supporters, many of them property developers. He had been chairman of the Newspaper Proprietors' Association and, more importantly, he had connections with a large number of stockbrokers. Acting together with a firm of City stockbrokers, Goodman and James Trevor Isherwood drafted a letter to the Stock Exchange. They estimated their chances of being able to go public at about 10-1, but with Goodman behind them they succeeded.
According to what McCartney published in his book, Goodman and Isherwood drafted a letter to the regulators - and presto! The request was approved and the company was allowed to go public.
What Goodman actually did other than author this letter, Miles (or McCartney) doesn’t say. The contents of that letter were never made public. For all that is known, there wasn’t even a letter and McCartney is inventing the entire story - or making many changes to it so it serves his purposes.
There is no footnote or source for these passages - and as Miles has been a journalist for decades - if one existed, he most certainly would have no reason not to use it as the source. He may have interviewed Isherwood while writing his book. Even so, McCartney would have had to approve it if it went into the book. Either way, why is McCartney bringing all this up - three decades later? What possible motivation could he have for telling these stories?
However, the fact remains that the IPO of Northern Songs was done illegally, as it didn’t fit the required “five years of operation” to allow it to access the public capital markets. Someone in the regulatory body of the London Stock Exchange signed off on the application knowing full well this public body’s regulations were being violated.
The question for Beatle historians is who else was involved in this decision and what was given/promised to this person in return for agreeing to the request to allow Northern Songs to go public?
The response by the public for the shares was weak.
All accounts of the IPO in the official Beatle historical record is that it was a huge success. That was “disinformation.” The initial reception for the shares by the public was weak - remaining at 5 shillings until Isherwood intervened - causing the price to rise to 70p.
Miles writes that “Isherwood remembers” (which would indicate that he actually interviewed him for the book, or else Miles is making the whole story up under McCartney’s direction):
The shares were not selling and so I bought every available share and eventually the market reached rock bottom. Over the next two or three weeks the public suddenly began to realize that as the music of John and Paul was being so widely played on the radio, perhaps the ownership of shares in Northern Songs was not a bad thing, after all, and buying orders for the shares began to arrive at the brokers.
So suddenly, large portions of the UK investing public who had considered buying shares, but refused, all of a sudden - because of the many times Beatle songs were heard on the radio - changed their minds and purchased stock in Northern Songs?
What caused such an abrupt change in the minds of the British public investors? Isherwood and/or Miles and/or McCartney do not say. (One would have to assume that if Isherwood was putting forth this explanation that he had canvassed the people who initially declined to buy the stock and then changed their mind to determine the reason for changing their mind. If not, how would he know what changed their minds in this short period of time?)
Isherwood recollects (as told to us by McCartney and/or Miles):
They (John, Paul and Epstein) got in touch with me, and I agreed to release five thousand shares that day, and subsequently about ten thousand each day at gradually increased prices.
Why did Isherwood use the word “release” instead of “sell”? As two million shares were initially offered to the public, it’s difficult to see how “releasing” 5000 shares (.25% of the stock being offered to the public) would have impacted the market price. Also, if more shares were available, this would weaken the stock price - not strengthen it. Isherwood’s comments make absolutely no sense.
While the text reads as if Isherwood “saved the day” for the stock - in fact what it sounds like is that they were manipulating the price of the stock, by buying it and selling it amongst themselves to drive up the price. In the financial community in London in 1965, this was an illegal act.
Why did Charles Silver receive 25% ownership of Beatle songs?
The last dark secret of Northern Songs relates to the story of Charles Silver. Supposedly, he was Dick James’ accountant who lent him 5000 pounds in 1961 so he could start his music publishing company. There is nothing in the official record of Silver making any investment in Northern Songs.
Yet despite Charles Silver receiving 25% ownership and of all future revenue streams of the publishing rights from the Lennon-McCartney musical archive, he never again shows up anywhere in Beatle history.
Here is McCartney’s entry in his autobiography on how he felt about what had happened when they created Northern Songs - and how Charles Silver was presented to them:
There was always this voting share that could beat us. We could only muster 49; they could muster 51. John and I were highly surprised to find that even though we'd been promised our own company, it actually was a company within Dick James's company that was to be our own company. And we thought that's not fair at all, but this was just the way they pulled the wool over our eyes. And we were on such a roll creatively; you couldn't just take a year off and sort out the business affairs. We had no time. We never met this Charles Silver guy; a character who was always in the background. Jim Isherwood clued us in a little bit as to who he was. He was the Money, that was basically who he was, like the producer on a film. He and Dick James went in together, so Silver always got what was really our share! There were the two of them taking the lion's share, but it was a little while before we found out.
Does McCartney mean they never met him before they signed the contract to create Northern Songs? Or that he never met him? Ever? If so, how is it possible that he and Lennon never met the man who held a 25% ownership position in all their songs?
Who was Charles Silver and what was his role in Northern Songs?
It is entirely possible Dick James and Epstein (or just Epstein himself with the knowledge of James but not his blessing) used someone named Charles Silver as a front, giving him a few shares of the new company, with the majority split between either James and Epstein or just Epstein. Epstein would have told McCartney and Lennon that he was putting up the money to establish Northern Songs.
If so, then McCartney and Lennon have a good reason for never having met Silver in person. There is no mention of Charles Silver in the official Beatle history books from 1964-1970 other than in the 1969 sale of their combined 37% share holding in the publicly-traded Northern Songs to ATV. This was an ideal situation for James and Silver (meaning James and Epstein or just Epstein) to dispose of their shares and put “Charles Silver” to rest once and for all.
The official record is that Dick James “and his partner Charles Silver” went behind Lennon and McCartney’s backs, and that they were angry that he hadn’t consulted them first as they were trying to seize control of the company and needed their shares. It is likely that they sold their shares in secret because they didn’t want Lennon and McCartney to find out how back in 1963 they were tricked out of shares in Northern Songs that should have gone to them (and/or George and Ringo).
How could the largest shareholder in the ownership of Beatle songs have remained out of the public eye for the entire time he owned these shares? Even if he wanted to? How could such an important person not have been mentioned in any media outlet? Why would he not want to be a part of the official historical record of The Beatles’ success? What would be his reason for maintaining complete silence?
What is particularly interesting is that it is only McCartney that is discussing these events that took place three decades ago. He must have a reason for including this info in the book as there is so much else he could have filled the pages with. To go to such lengths to relay to Miles about private conversations that took place decades in the past - was not done by accident or without any reason.
It sounds as if he knows much more than he is willing to publish but realizes it would not be wise to come out publicly and tell the whole story. He could be putting it out there in the hope that someone else picks up on it. Or, he hasn’t taken the story that far along and simply wanted to get back at those whom he believed ripped him off. He himself may or may not even realize what the real story is with Charles Silver.