Branson: Behind the Mask (28 page)

On the surface, the random collection of properties reflected a billionaire’s eccentricity. Others interpreted the well-placed locations as a legitimate strategy to protect Branson from any government asserting that he was a resident liable to local taxes, even in the Virgin Islands. With a private plane to connect him to a string of remote locations, even a sophisticated tax inspector would find it difficult to ascertain the duration of his stay in any one residence. Legally avoiding corporation tax, capital-gains tax and income tax had become a preoccupation ever since he had been caught evading purchase taxes in 1971. He also avoided commenting about his status. Forty years later, as public anger over Amazon’s and Google’s tax-avoidance schemes rose, he expressed a benign opinion: ‘If companies are trading in the UK, they definitely should be paying UK income tax. If they’re trading overseas, then they’d be foolish to pay UK income tax. People should just play within the rules that are set up.’ Ever since he had been arrested for his purchase-tax fraud, Branson played within the rules. His achievement was to deflect scrutiny while posing as the good citizen.

A gravy train of guests – mostly plucked from the music, media and art worlds – were regularly invited to Necker to reinforce his image. After enjoying a week’s glorious holiday with twenty other guests in an idyllic playground, all of them returned to their homes to regale friends about Branson’s generosity. All mentioned the fun, but the astute noted the distance their host
maintained. Those attempting to forge a closer relationship were gently rebuffed, with Branson diverting any attempt to probe with, ‘Right, let’s see who can swim fastest around the island,’ and other challenges. Most returned to London or Los Angeles flattered. A minority were bemused. Few were any wiser about the man behind the mask. They were aware, though, of his burning desire to secure political influence.

Having reached the age of sixty, Branson had become irritated with young politicians. While enjoying life in a succession of paradises, he doubted the politicians’ ability to cure the world’s economic crisis. He had particular disdain for David Cameron, criticising the prime minister, sixteen years younger than himself, for his abilities, not least in solving the plight of unemployed youth. Businessmen, he believed, were better placed to mentor the young, and finding platforms where he could advocate his solution was not difficult.

Two weeks after regaling his audience in Vancouver, Branson briefly visited London’s East End. Dressed in a blouson leather jacket and jeans, sporting his Necker suntan and with grey streaks lining his fading blond hair, he delivered a philanthropist’s solution to youth unemployment. ‘This situation’, he told his audience pointedly, ‘cannot just be left to politicians and social workers.’ Rather, it fell upon himself and other billionaires to bear the burden. ‘With great wealth and power comes great responsibility,’ he said. ‘We want to encourage entrepreneurs worldwide to unite together to use our entrepreneurial skills to tackle some of the world’s biggest problems.’ Although he could not match Bill Gates’s pledges to give away 95 per cent of his wealth to charity – and Gates had already given £17 billion – Branson did offer half his fortune, without quantifying the amount, and also offered his celebrity for the cause. That was too valuable to ignore.

In Britain, aspiring entrepreneurs still eagerly sought his endorsement. His support for StartUp Britain, a new campaign
to ‘celebrate, inspire and accelerate enterprise in Britain’, thrilled the organisers. ‘Our businesses need to be innovative, maintain a certain quality, be value for money and have a sense of fun,’ he wrote. He described the importance of perseverance, overcoming early adversity and recruiting staff who ‘you like, trust and who work hard’. At the Global Entrepreneurship Congress held in Liverpool, he advised young people to use student loans to set up businesses rather than going to university. In the midst of the recession, he urged the Conservative-led government to cut taxes, subsidise job sharing and educate schoolchildren in business studies. His advice mirrored his support for teaching aspiring businessmen at the Centre of Entrepreneurship in the Caribbean, although he was contradicting his earlier discourse: ‘You can’t teach people to be entrepreneurs except to learn from your mistakes.’

While Branson set himself up as an example of the perfect tycoon, there were some in London who were discovering the downside of his philosophy. A campaign had erupted on the internet criticising Virgin for its treatment of contractors who had supplied Virgin Vie, the clothing company; and Crispin Thomas, the creator of the Gadget Helpline, was perplexed by Virgin’s bid to launch Virgin Digital, a similar service. ‘We’ve taken our millionth call,’ said Thomas, fearing Virgin might successfully copy his idea. Branson was also selling a majority of his shares in the chain of Virgin Active fitness clubs, the last of his big enterprises which he completely owned.

After the financial crash, Branson admitted, ‘We were in survival mode.’ To raise cash, Virgin tried to sell its fitness clubs in South Africa, Europe and Britain. But with too many rivals in a saturated market, Virgin Active’s value had slumped and the planned flotation, which aimed to ‘net over £1 billion’, was cancelled. Instead, Matthew Bucknall, the co-founder, borrowed to buy indebted rivals and in 2010 tried again to sell the expanded
chain of 254 clubs with 1.1 million members in five countries for £1 billion, including the debts. That plan was also abandoned. Finally, a 51 per cent stake was sold in 2011 to CVC Capital Partners, a London private-equity firm, for £450 million ($707 million). Branson was cashing in to fund his loss-making ventures, especially Virgin Atlantic and Virgin Galactic.

Commercially, he had reached a crossroads. He no longer owned any major business in its entirety. All were either jointly owned or merely branded offshoots. His reputation was intact – and still a lure for aspiring entrepreneurs. And yet, during over forty years of business, there had been many casualties in his quest for profits. To some of them,
Screw
Business
as
Usual
might have appeared like an apology. After all, in his own words, he recognised the flaws of his conduct during the 1970s and later. So it was natural that a small group of decent professionals, attracted in 2012 to a new project financed by Virgin, should have allowed their instinctive concerns to be assuaged by promises made on Branson’s behalf. For Branson, the small venture was inconsequential, but those who trusted Virgin were unprepared for the blowback of the company’s terms of business. Whatever he wrote, Branson could not break the habit of a lifetime’s profiteering. The Virgin model could crucify the unwary.

Branson’s parties at his Oxfordshire farm were fun. He was a generous host and his enthusiasm was infectious. In 2010, he had, as usual, invited the winners of the
Sunday
Times
’
annual ‘Fast Track’ business competition to his home. The coveted prize for the aspiring entrepreneurs was an opportunity to meet the idol.

Among the guests was Sean King, the chief executive of Seven Squared, a digital-publishing group producing advertisements and content for retailers’ magazines, including Waitrose and, later, Sainsbury’s. Ranking thirty-seventh on the
Sunday
Times
list, Seven had once successfully pitched to supply Virgin Atlantic’s in-flight magazine, but the airline’s losses had terminated the deal. The disappointment did not prevent Giovanni Donaldson, Virgin’s development director, from approaching King at the party. Just as Alex Tai had introduced Branson to Formula One, Donaldson was an outrider competing for Branson’s attention. Donaldson knew about Branson’s irritation at having missed out on the internet revolution and his hankering to become a media mogul by owning a TV station or a Hollywood studio. Recently, Branson had created Virgin Produced to co-produce two films a year with Rogue Pictures in Los Angeles. ‘The Rogue and Virgin brands seem an obvious fit for each other,’ Branson had said.
Movie
43
,
their first film, starring Kate Winslet, would be described as ‘unremittingly awful’, ‘barrel-scraping sleaze’ and ‘the worst film ever’. There was a solution, Donaldson believed, and King was an ideal partner.

Apple had unveiled the revolutionary iPad in March, and Donaldson wanted to publish the first global magazine for the creative community as an app on the tablet computer. ‘It’ll be new and exciting,’ he told King. ‘It’s where the new media is heading.’ Virgin Galactic would be first in space, said Donaldson, and Virgin would publish the first iPad magazine.

Days after the party, Donaldson visited King with an offer. If Seven could assemble an editorial team and launch
The
Project
, as he called it, their iPad magazine would be ‘the start of a new era’. Ownership would be shared between Virgin and Seven. Virgin would invest £300,000 in cash, while Seven would invest more by employing the staff and paying for the production. The difference, Donaldson explained, was accounted for by Virgin’s contribution of its brand.

Seven was not a risk-prone publisher, but Donaldson’s proposition made the directors feel especially chosen. In common with most guests at the Oxfordshire party, they regarded Branson with awe. Donaldson’s repeated mention of ‘Richard thinks …’ and his encouragement of Seven’s participation in other Virgin ventures suppressed their doubts. The clincher was Donaldson’s prediction that the magazine would attract advertisements from many of Virgin’s 300 companies and be purchased by millions of its customers. To be certain, Seven’s executives read Branson’s book. ‘I always wanted Virgin to be a strong model of social entrepreneurship,’ he wrote. ‘All my businesses have always focused on giving everyone a “fair go”.’ In print and in person Branson spoke with an honest-sounding voice and, with that testament, the directors clung to the magic. They decided to take the risk.

‘We’d like to get Holly on board,’ added Donaldson. ‘It would be good to get her involved.’ The directors of Seven did not object: Holly’s participation would bring them closer to Branson. In Virgin’s headquarters, Donaldson had spoken about ‘giving
Holly an ambassadorial role, possibly as the publisher’. Her involvement, he hoped, would secure the support of her father, who would surely be enticed even further by Rupert Murdoch’s announcement of
The
Daily
, an iPad newspaper to be published in collaboration with Apple. Revenge for his fate over the ITV bid tilted the odds, and Branson approved Donaldson’s proposal.

Anthony Noguera, an acclaimed former editor of
Zoo
,
FHM
and
Arena
,
was appointed as the editor. His brief was to ‘do something new and exciting in the digital space’, focusing on entertainment, culture, design and travel. Since the iPad was not yet on sale in shops, no one was quite certain about the technology for a magazine’s format. Donaldson’s instruction to ‘white-label something’ hardly helped. Nevertheless, in May Donaldson approved Noguera’s dummy of
Maverick
,
the agreed name, and authorised the employment of twelve staff with an initial budget of about £500,000. Normally, a new glossy magazine targeting a large readership recruited around thirty editorial staff and would be given a launch budget of £5 million.
Maverick
’s
limited funds restricted the advertising department to just one man, Charlie Parker, who was employed by Seven. Highly rated in the industry, Parker would usually have led a team of five salesman for a start-up. But since the budget was small and Parker expected Virgin’s companies to advertise, no one complained. In anticipation of
Maverick
’s
launch before Christmas, potential advertisers were introduced by Parker to a tablet offering unprecedented technology which allowed the publication of ‘a monthly magazine that will change daily, hourly – minute by minute at all times’.
Maverick
would be promoted on Apple’s app store as ‘truly revolutionary’ and sold at £1.79 an issue.

In August 2011, Donaldson summoned a meeting at the School House in Hammersmith to view Noguera’s latest dummy. Even Apple’s representative was excited by the links
to the web, producing novel high-tech 3D content juxtaposing words, pictures and video clips with pop-up audio surprises. But Donaldson’s excitement was tempered by disappointing news: Virgin’s lawyers had discovered a music magazine called
Maverick.
The title had to be jettisoned and, bereft of other ideas, they reverted to
The
Project.
Another dampener was Gordon McCallum’s lack of enthusiasm. The chief executive was renowned for his grinding scrutiny of every business’s financial viability, but he eventually approved
The
Project
on Donaldson’s assurance that Virgin’s investment would, as usual, be minimal. With Richard and Holly Branson’s support, Donaldson could brush McCallum’s pessimism aside, disguising from the visiting journalists the fact that within Virgin he was a small fish swimming alone.

Any final misgivings during the meeting were suffocated by the euphoric tone of Catherine Salway, Virgin’s marketing director. Salway spoke in ‘super-positive words’ about the ‘amazing things that will happen’ to promote, finance and sell
The
Project.
As part of the Virgin family, she said, the magazine could expect ‘a flood of advertisements’. Virgin took care of its partners. Like Donaldson, she ignored the industry’s expectation of magazines being loss-makers during the first three years. Instead, to satisfy Branson’s criteria, she forecast instant break even.

Light-headed, the editorial team left the building, exchanging smiles and high fives. But as they walked through Hammersmith, a Virgin employee unexpectedly appeared. ‘None of those things will happen,’ he whispered. ‘It’s all a lot of hot air.’ None of the team believed his gloomy warning.

The honeymoon was brief. Eight weeks later, the initial budget had been spent and neither Virgin nor Seven was prepared to invest more money. Suddenly,
The
Project
seemed likely to die. The lifebelt was thrown by Noguera. Committed irrevocably to the vision, he bought a stake in the company for
about £30,000. Donaldson was thrilled: he needed a success to disprove McCallum’s scepticism. The electronic magazine, featuring a video of the actor Jeff Bridges on the ‘front cover’, was launched on 30 November 2010 in New York.

In Branson’s life, every minute was carefully programmed. His time was too valuable to waste. To those producing
The
Project
, Branson was akin to the Pope, the figurehead of a vast, rich organisation. Until the launch, he had remained the invisible power. As the big day approached, they realised that the venture was of little importance to Virgin. The company’s management was focused on the new bid for Northern Rock. Nevertheless, Branson’s schedulers allotted four hours for him to personally promote the magazine across Manhattan. In their timetabled programme, Branson would meet journalists at a launch party and then perform colourful stunts to attract free publicity.

‘Richard’s on his way from Switzerland,’ a Virgin publicist confided. ‘He’s been speaking to Kofi Annan, one of the Elders.’ The image of Branson bidding goodbye to an international statesman and flying in his private jet to New York made one journalist swoon: ‘
The
Project
is only a small part of his amazing life but he’s coming.’ He clutched the alluring profile provided by the publicist, which described Branson as the man who ‘wants to revolutionize the consumer airline industry on multiple continents, take tourists into space and save the planet’. Branson’s arrival with Holly was ‘low key’, one guest would say. Holly’s presence, the editorial team agreed, aroused curiosity. They were meeting their publisher for the second time.

One hundred journalists and freeloaders turned up at the breakfast party at the Crosby Street Hotel to meet Branson and hear his comments about Murdoch’s
The
Daily
–
also on the eve of its launch. The clash excited a frisson of interest among those enjoying the food, which had been provided, as usual, by sponsors in exchange for free publicity. Branson, the journalists
knew, could never resist poking a Goliath with hype. ‘I’ve read quite a bit in the last few days about a battle I’ve launched with a certain newspaperman,’ said Branson to the crowded room. ‘This is not a battle, it’s not a war, it’s the future of publishing.’ Having secured his audience’s attention, he continued, ‘This was Holly’s idea. She showed me the amazing, innovative editorial and advertising in
The
Project
and then I got to know how groundbreaking digital publishing can be. To be frank, it blew me away. It’s the future of publishing.’ Branson looked at his daughter.

‘It looks really cool,’ Holly agreed. She was not heard to say anything more about the magazine. Ever.

Before arriving, Branson had been briefed on the facts. As he worked the room with encouraging words, he knew the answer to the question, ‘How many downloads have had you so far?’ But the second question – ‘What’s your capacity for downloads?’, referring to the speed of the downloads and how many the site could handle – left him speechless. ‘An awkward moment,’ thought a Virgin aide. More troubling was his admission that ‘If bloggers don’t like it, we’ll be dead very quickly.’

Despite the rain and cold, next he climbed into a dilapidated van. While driving uptown, he changed into a suit made of newspapers and pulled a mask over his face. At that moment, no one could doubt his commitment. At pre-selected spots – starting with Apple’s flagship store – Branson sprang out of the back doors like a man possessed to surprise pedestrians who were invited to meet a celebrity. The waiting photographers recorded his pose beside a newsprint-covered mannequin. In Virgin-speak, the cheap promotion was part of their ‘guerrilla’ tactics.

Exactly four hours after arriving at the hotel, Branson bid everyone goodbye. He briefly reappeared in the evening at a reception for 300 people, but was not introduced to Charlie Parker and his guests from BMW and other big potential
advertisers. Branson left, unaware of Parker’s concern. ‘It’s a great opportunity,’ Parker confessed to his employer, ‘but Virgin’s expectation of what it can earn without proper investment is ridiculous.’ On the basis of the circulation which Virgin had predicted, Parker had obtained for the first issue the high rates the company demanded for advertisements, from BMW, Panasonic, Ford and Kronenbourg. Virgin’s reputation, Parker acknowledged, had won the advertisers’ trust.

Over the following days, Donaldson and King congratulated each other on the positive coverage for the first issue. Apple ranked
The
Project
among the best apps. The absence of similar ones convinced Donaldson that the thousands buying iPads would automatically subscribe to the magazine, and he spoke optimistically about Virgin leading the revolution. At the company’s headquarters, he was collating the real-time financial results. Gradually, his optimism faded. For a start, Catherine Salway had sold hardly any advertising, and Virgin’s companies had declined to co-operate. Launching a magazine without a marketing budget was folly and, to Donaldson’s surprise, Virgin’s customers had not yet started to buy iPads. Contrary to the popular image that Virgin was for the hip and young, many of its customers were in fact quite old. Finally, Donaldson’s requests to Apple to promote the magazine were ignored. Apple, he discovered, refused to create an accessible point-to-buy app to encourage sales. The corporation’s enthusiasm for
The
Project
had vanished after discovering that Virgin was unwilling to invest in the magazine or the marketing. Worst of all, no one had realised that most potential subscribers lacked the cable or wireless capacity to download the magazine’s big file. At best, downloads took ten minutes, but repeated glitches disrupted the transfer. Donaldson’s discomfort grew after Salway declared, two weeks after the launch, ‘People think Holly shouldn’t take any role and stay out of it.’ Donaldson feared that his career was
at stake, and instead of bracing himself to improve the magazine plunged into protecting his position. The editorial staff watched a confident executive metamorphose into a bit player uneasy in the spotlight. ‘We’ve got to protect Virgin’s reputation,’ was his coded expression of fear.

‘We need more money,’ Basil Hassan, a Virgin accountant placed into the magazine’s editorial office, regularly told Charlie Parker. ‘How much are you getting? The sales aren’t good enough.’ The advertising executive was in a dilemma. Virgin wanted instant income from its paltry investment, but the advertisers wanted the first sales figures before making a further commitment. Since the circulation of the first edition was much lower than predicted, Parker could not sell new advertising. ‘We need more money before we can invest,’ Hassan told him. Without investing in marketing, replied Parker, the circulation would remain low and the advertisers would not commit. ‘And Virgin wants too much for ads,’ he exclaimed. Their disagreements became vicious, but
The
Project
needed £1 million to survive.