Merchandising
Before the Beatles achieved nationwide success in Britain, Epstein had permitted a small company (run by his cousins, and which initially catered only to fan club members) to produce Beatles' sweaters for 30 shillings and badges for six pence, eventually selling 15,000 sweaters and 50,000 badges as the Beatles' popularity grew. When Beatlemania stormed the UK in 1963, Epstein was besieged by novelty goods companies wanting to use The Beatles' name and images on plastic guitars, drums, disc racks, badges, belts and a huge variety of assorted merchandise. Epstein was adamant that the Beatles would not directly endorse any product, but through NEMS Enterprises he would grant discretionary licences to companies who were able to produce a quality product at a fair price, although many companies were already selling products without a licence.
When NEMS was swamped with offers of endorsements from America following the success of "I Want To Hold Your Hand", Epstein, who was usually meticulous in matters involving the Beatles, decided to delegate this responsibility as he felt it was distracting him from his main task of managing his expanding roster of artists. He then asked Jacobs, his London-based, Hove-living celebrity lawyer (Jacobs's other clients included Marlene Dietrich, Diana Dors, Judy Garland, Liberace and Laurence Harvey) to appoint someone specifically to take over the assignment and gave Jacobs power of attorney in the matter. Jacobs at first handed the daily management of this to his chief clerk, Edward Marke, but it transpired that Marke knew almost nothing about the merchandising business, and so Jacobs was forced to look elsewhere.
Jacobs knew of a Chelsea socialite, a 37-year-old divorcé called Nicky Byrne, and when encountering him at a friend's cocktail party offered him the project, saying that "Brian has made a terrible mess out of this ." Byrne, who has said he had been "sitting around doing nothing for half of 1963" was an ex-Horse Guard trooper and amateur racing driver. He had also previously been involved in music publishing, clothes design, theatre production, managing the Condor club in London, and was also known as being a part of a group of people who called themselves "The King's Road Rats". He had not had any previous experience of merchandising or managing a large business.
Byrne was at first reluctant but later agreed, and delivered the merchandising contract to Jacobs's office on 4 December 1963, leaving blank the percentages. Jacobs asked Byrne what percentage rate he should write down to which Byrne ambiguously replied: "Oh, look, just put in 10%." A typical percentage would have been 75% or 80% for NEMS, and Byrne expected Epstein would begin to negotiate. However, the contract came back initialled (meaning Epstein had read it) and signed by Epstein and Jacobs. Jacobs's advice to Epstein was, "10% is better than nothing". This lapse of shrewdness set the scene for what would later become a legal battleground which deprived the Beatles and Brian Epstein of such large sums of money they would have easily overshadowed any royalties they would receive in the medium term from the sale of records. Byrne later said: "They couldn't wait to get somebody else to do this, because they were in a mess themselves." Epstein would later realise that he had made a colossal error of judgment, as Byrne charged 10% commission to the merchandisers for a licence (receiving $10 out of every hundred) and then giving 10% of that to NEMS, which was $1.
Read more about this topic: Seltaeb