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Apple - The short, strange blossoming of The Beatles' dream

As Apple re-releases its eclectic catalogue, Ray Connolly recalls chaos and creativity, and telling Paul about a naked John

When Charlie Chaplin, Mary Pickford, DW Griffith and Douglas Fairbanks set up their own Hollywood film studio, United Artists, in 1919, the joke in the film industry was "the inmates are taking over the asylum". That may have been a somewhat jaundiced reaction, but it was to be replicated to the very smirk when, in 1968, four other artistes created their own group of companies. They were The Beatles and their company was called Apple Corps.

"We've got all the money we need," Paul McCartney, then a worldly wise 25-year-old, told me at the time. "I've got the house and the cars and all the things that money can buy. So instead of trying to amass money for the sake of it, we're setting up a business with a social and cultural environment where everyone gets a decent share of the profits. I suppose it'll be like a sort of Western communism."

And, with that foray into a new strand of political science, an advertisement was placed in the underground bugle of the day, the International Times, inviting readers to send in their film scripts, songs, poems, tapes, fashion designs, inventions, plays, electronics, novels and recordings. You imagined it, and it was sent to Apple for possible financial backing.

Big mistake. Within days a trickle of hippie hope had turned into an avalanche of useless tat and dreams being delivered to The Beatles' offices in a newly renovated Regency house in London's Savile Row.

To the music business at large, an industry not best known for altruism, this was the hippie ideal gone truly mad. If Dick James, the head of Northern Songs, the company that published the Lennon and McCartney catalogue of music, had needed any encouragement in his plan to sever his links with The Beatles following the death of manager Brian Epstein a year earlier, this had to be it. Within months the songs had been sold to Lew Grade at ATV.

As it turned out the cynics were quickly proved at least partly right. Staffed by many of the group's old friends from Liverpool, few of whom had any real business acumen, Apple quickly became a financial whirlpool as money was sucked away to places unknown. Perhaps the group's first venture outside music, a fashion boutique in nearby Baker Street, should have been a warning, quickly turning into a Beatle-takeaway as, in the absence of much in the way of security, customers simply helped themselves to the designs and walked out without paying.

If it was an omen it wasn't spotted. As a character known as Magic Alex was given funding to build a new recording studio, which didn't work, and grotesque bills for drinks, food, taxis and flowers began to rain in, accountants were soon trying to trace an Apple-owned Mercedes that had simply vanished off the face of the earth.

Within a year, with John Lennon joking he was "down to his last 10,000 [pounds]" and they'd "all be broke within six months if this carried on", American Allen Klein was introduced to sort out the mess. Another big mistake: Klein quickly dropped James Taylor's contract and lost them millions. Meanwhile the sackings began: the dream was over, as Lennon used to sing.

But it wasn't all a naive failure. Apple, as a small, short-lived record company, wasn't without its successes. For decades all Apple records have been highly valued as collectibles, and from October 25 The Beatles' early work as producers and unheralded backing musicians for other artists will finally be made available for digital download.

There will be some surprises. Who knew that both Paul McCartney and George Harrison played on the original recording of James Taylor's "Carolina in my Mind", or that Harry Nilsson was originally under the impression that McCartney had written his eventual Grammy Award-winning hit "Without You", and not Beatles protégés Badfinger? Or that Apple released a Modern Jazz Quartet album, and that it was at Ringo Starr's insistence that John Tavener's The Whale was recorded for the label?

Over the decades the legend of Apple has come to be considered a kind of late-Beatles folly, and the roof-top where they played their last gig, but at the time there was something magnificently crackers about it. While all around them the edifice of The Beatles was imploding, the band and their staff still practised a continual open house in Savile Row where friends could drop in uninvited for a chat with whoever happened to be about.

There, especially in Derek Taylor's press office on the second floor, many a pleasant afternoon for a young journalist, scotch and Coke in hand, could be passed playing acetates of new Beatle recording sessions – at least one, "Teddy Boy", never released by them – while outside on the pavement the teenage girl fans whom George Harrison christened Apple Scruffs stood sentinel. And all the time the phones never stopped ringing from around the world.

On one day you might meet the very young, long-haired, James Taylor, whose first album was being produced by Peter Asher – the rumour that he'd spent time in a mental hospital before coming to England marking him as someone especially exotic; and on another there would be Sweet William and Frisco Pete, a couple of Hell's Angels from San Francisco who were stopping over on their "way to straighten out Czechoslovakia". In the end one of them tried to straighten out the Apple Christmas party, eyeball-to-eyeball with a Santa John Lennon, after which they disappeared back to California.

At different ends of the many-tentacled Apple social spectrum were the well-scrubbed 17-year-old schoolgirl Mary Hopkin, from Swansea, who McCartney decided should sing a Russian folk song he'd heard in a club called "Those Were the Days", poet Allen Ginsberg, pop-artist Alan Aldridge, Tariq Ali and Oz publisher Richard Neville.

Every day, it seemed, young and groovy Americans were beating a path from Heathrow to The Beatles' front door where, if they could get past the lovely but unbending Debbie in reception (a place described at the time as resembling "the waiting room of a Haight-Ashbury VD clinic), they were up the apple-green carpets and into the nerve centre of what often resembled a happy and tolerant Casey's Court.

In one room the house hippie, Richard DiLello, a boy with hair not unlike a friendly dahlia, might be blowing up 200 white balloons for a John and Yoko happening; in another someone else would be rolling a joint; while in the press office the elderly Bill Collins, a friend of McCartney's father, would be trying to convince someone/anyone to write about his group Badfinger, or, failing them, his son Lewis (later the star of The Professionals). Then there was the girl who wanted financial backing to make nude sculptures of herself out of patent leather.

What the visitors really wanted was to bump into a Beatle on the stairs. And, in the early days at least, that would often happen. There would be George talking earnestly (and usually to blank faces) about Krishna, John in a Tommy Nutter white suit ordering acorns to be planted at Coventry Cathedral in the cause of peace, and busy-busy Paul interfering all over the place as he saw his dream going wrong. Ringo was, he liked to say, "just the office boy".

Hanging around Apple at the time it was impossible not to be aware of the daily tensions. There were tears when one of the old Liverpool mates was sacked by Allen Klein, with no intervention to save him from the Fab Four; Derek Taylor's Olympian damage-limitation exercise to the world's press when John and Yoko got busted; and the astonishment and then anger on a Beatle face when it accidentally fell to me to tell Paul that John and Yoko were going to be naked on the cover of the Two Virgins album.

And then there was the slamming of doors and running on the stairs the day Lennon told the others he was leaving the group. What is astonishing is the amount of music that was still being generated in and around the general bedlam. Putting aside John's gift to the Oz fighting fund, Long Live Oz, a lamentable gift to raise funds for the magazine's publishers who were shortly to be hailed before the courts on pornography charges, Harrison was playing on sessions for Jackie Lomax, Billy Preston and Doris Troy, along with pals Eric Clapton and Keith Richards – happy to be uncredited musicians when asked.

McCartney, for his part, was coming up with top-ten hits for Badfinger, Mary Hopkin and Cilla Black (for whom he wrote "Step Inside Love" – it was going to be called "Come Inside Love" until someone pointed out that it might be misunderstood.

Then, of course, there were The Beatles' own records from that period – The White Album, Let It Be and Abbey Road – released on Apple if only as a friendly courtesy from EMI, who retained the copyright. For McCartney it now seems that only frantic work could assuage the pain of seeing his world collapsing.

For decades the Apple catalogue of albums and singles have been collectibles, changing hands for considerable sums of money. Their digital rebirth, sadly minus a Delaney and Bonnie album that was never released, is hardly going to alter that. There's nothing like the vinyl in the original sleeves for collectors. But hopefully the re-releases will cast a kinder light on that utopian dream of an artistic "Western communism", that never really had a chance. It wasn't all silly.

Apple Records's remastered catalogue is out on CD and download on 25 October.