Virgin Records, RTC, Peaches Record Stores and CBS Records New Zealand 1976/1977

Motown Records Executives 1976
Barney Ales, President, John McCready, International Marketing Manager and Ken East, MD of International.

Based in London, as International Marketing Manager for Motown Records I had a busy and interesting job. My problem was the position was mainly guiding and giving advice to the various country managers and I missed the hands on day to day battle of running a record company. Then, came an offer from my old company Phonogram that was too good to resist. Phonogram asked me to become their Managing Director in Australia.

I accepted the job, resigned from Motown and sold our beautiful home in Barnes SW13.

My Motown boss Ken East was supportive. But, Ken cautioned me. My leaving Phonogram two years previously had been acrimonious after I fell out with my UK boss and head office in Holland had not really looked after me.

KEN EAST

Ken was right. A couple of weeks prior to the departure date for Australia I had a call from someone at Phonogram head office, a man I’d never heard of, let alone met. They had a problem in Australia that was not immediately solvable and the job offer was put on hold until the problem could be sorted. In the meantime the mystery man, apparently from Human Resources, asked how I would like to head up their UK music publishing business. 

Angry and confused I made contact with the person who offered me the Australian job. It turned out it was a legal problem to do with firing the current Australian MD and it was unlikely to be solved quickly.

My options were limited to accepting the offered UK position or taking a payout. Having sold our home and not finding the UK publishing job appealing, I decided to take the payout. The family had gone through the mental process of moving down under, our home was sold and we were free to seek new adventures.

I gave some thought to what I might do if we returned to New Zealand. All the major record companies had good long-term managers, so it was very unlikely a position of interest would be available for me. The idea of starting my own independent record company began to formulate.

Having admired Virgin Records and their success I decided to have a talk with them regarding the status of their New Zealand representation. I knew Ken Berry, Virgin's International Manger and arranged an appointment. To my surprise the Virgin contract with EMI in New Zealand was about to expire and they were unhappy with that representation. Even more surprising they were prepared to take a risk on me and we agreed a deal.

Ken Berry

LATE 1976

With my family I flew back to Wellington New Zealand where I explored the best way to set up a new record company. It soon became obvious that Wellington was not the best city for a base, the major population and market being Auckland. Also obvious was that I needed more capital.

I had been talking to my good friend Warwick Woodward, an advertising agency owner. One of my closest friends, Warwick was, like me, a record "nut". Warwick had the largest record collection I had ever come across. Our discussions were on creating the company name and logo and I decided to call the company RECORD AND TAPE COMPANY, shortened on the logo to RTC. I mentioned to Warwick my funding problem and he immediately asked to become my partner in the venture and was prepared to match my capital input. I agreed.

Warwick Woodward

So, off we went, family and me, to Auckland to set up home and business. Having rented a house I sat down and did some serious cash flow projections to estimate the likely cost to set up the business. Included was the renting of an office and warehouse, purchasing physical product and paying the staff needed to operate. Our capital was woefully short of what was required. I decided we needed to emulate Virgin in the UK and open a retail record shop. The retail shop would generate quicker cash flow than a wholesale distribution business could.

Warwick agreed, but pointed out I couldn’t physically run a hands on record shop and a wholesale distribution business at the same time. He had heard that Brian Pitts, who was marketing manager at Phonogram New Zealand when I headed the company, was looking for a position. We approached Brian and he agreed to join us as an equal shareholder. I would be Managing Director of the company and Brian head of distribution. I would manage the retail shop and Brian the Virgin/RTC distribution.

Brian Pitts

Good retail space around Queen Street was at a premium. The best I could find was a small space tucked away in Imperial Arcade, off the lower end of Queen Street. Problem was, in the nearby Queens Arcade were two good record stores, Marbecks, NZ’s best record retailer and Direction, a new outlet.

We decided to go for it. I commissioned shop fittings, called the store PEACHES and organised a logo. Because of my good reputation in the industry I was able to set up accounts and credit with the major companies, including WEA, Polygram and EMI. We were soon up and running and though the sales were not huge, reasonable cash flow began.

Shop Bag of PEACHES

Peaches T Shirt

Meanwhile Brian had found warehouse premises in a site at Britomart Place, recently vacated by WEA. We had organised to purchase the Virgin stock held by EMI and agreed a record and cassette manufacturing contract. Soon stock was arriving and in the evenings I assisted Brian in setting up the warehouse shelving and the cataloguing of stock. We were under way with both arms of the business.

Whilst business took longer to get going on the RTC distribution side, the retail business was going well. I started looking for a 2nd location in Queen Street. I noted a bag shop, beautifully located on the corner of Queen and Victoria Streets. The bag shop had the prime position in a mini mall known as The Corner and not as busy as the location warranted. Approaching the owner he said he was being beaten badly by nearby major brand outlets and after several meetings agreed to sell the lease. This was an absolute top location and in later years became Whitcoulls and then Farmers.

Soon I had set up the 2nd bigger and better PEACHES and employed staff for both outlets. Whilst maintaining management oversight of both shops the majority of my time was to the bigger and more important one. Copying the bulk display style of Tower Records in the USA, a business I much admired, the outlet was different from any, then Auckland record shop. PEACHES on The Corner was an immediate success and the cash came rolling in. On late night shopping Friday evenings the place was jammed full of record buyers and buzzed. During the week the store’s location brought in passers-by and additionally word of mouth had many enthusiastic record collectors becoming regular customers. 

Peaches The Corner in-store

Peaches The Corner, Victoria Street Window

Not long after the second PEACHES was up and running the owners of the Direction shop requested a meeting. Our sales had been affecting them and they wanted out of the Strand Arcade location. They offered to sell their lease for a very reasonable sum. I accepted, found a loophole in the Imperial Arcade lease that allowed us to vacate and moved the shop to Strand Arcade.

Meanwhile Brian had successfully got RTC going and it was becoming financially viable. One hiccup was that many leading record shops, especially in Auckland, would not buy from RTC as they saw us as rivals. This was because of our two retail outlets, but actually ended up being to our advantage, especially with The Sex Pistols. Punters searched in vain around AUCKLAND for their discs and on discovering PEACHES had stock the shops became “in”.

We were now financially viable with Brian and I both taking a reasonable salary. Staff were being paid on time and bills not in arrears. We did however, have one major money problem. We had agreed to pay Virgin a minimum quarterly payment and sales of the label’s recordings were not yet sufficient to cover the commitment. If we didn’t pay when due we would be in breach of contract.

I Phoned Ken Berry at Virgin and gave him the bad news, plus an update of where we were at with sales of Virgin and our retail venture. Ken was warm and friendly, thanked me for being honest and said he would discuss it with Richard Branson and call me back. Next day Ken called and advised they were happy with what we were doing and with our honesty. He said we could forget the minimum payment and we could just pay quarterly on actual sales. My admiration for Virgin, Ken and Richard and the way they operate was cemented forever.

Whilst Virgin was a unique and important label, Brian and I realised we needed more product and we thought about the possible companies we could chase to represent. As head of Phonogram NZ (now Polygram) in 1973, before moving to the UK, I had negotiated and completed the contract for CBS and remembered that the contract would end later in 1977. We decided I would approach Bill Smith, Chairman of CBS Australia and seek rights to their label.

Bill Smith and I met and I pitched our case. Over lunch Bill gave his verdict. There was no way he would allow little RTC to represent CBS. However, he said it was time for CBS to have their own company in New Zealand and asked if I would head that operation and set it up. Though flattered I declined, explaining I had partners to think about and whom I’d encouraged to join me in the RTC/PEACHES venture.

Bill said it wouldn’t be happening for several months and until then, the job was mine if I wanted it.

AWT (Bill) Smith, Chairman CBS Australia and John McCready

LATE 1977: WE SELL THE PEACHES RETAIL BUSINESS

A few months passed, both RTC and PEACHES continued to grow satisfactorily. Then, surprisingly, Polygram approached us and made an offer to buy the PEACHES retail business. 

The offer from Bill Smith had been on my mind and it excited me. This was a rare opportunity to do something groundbreaking in setting up a major company from scratch. Bill Smith confirmed his offer was still open and he would be delighted if I accepted.

So, Warwick, Brian and I decided to sell PEACHES, I would vacate my shareholding and move to CBS. Brian would then become RTC Managing Director and carry on leading the distribution business.

Ironically Polygram were unaware that by purchasing PEACHES and in effect making me redundant, they had facilitated my becoming head of a new rival company. However, on setting up CBS we partnered with Polygram by contracting them to manufacture our product and warehouse/distribute orders to retailers. Our new CBS team handled Product selection, Promotion, plus Sales and Marketing. That relationship proved a successful one for both CBS and Polygram.

Brian went on to success with RTC and later he and Warwick sold the business to VIRGIN with Brian continuing on as Managing Director of Virgin Records New Zealand.

In 1981 I was promoted to Managing Director of CBS Records Australia and carried on a warm relationship with VIRGIN, as CBS represented them in that country.

John McCready, EARLY DAYS AT CBS RECORDS NEW ZEALAND