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Placebo was founded when former Luxembourg schoolmates Brian Molko and Stefan Olsdal met by chance at South Kensington tube station in 1994; they had previously attended the American International School of Luxembourg together (and Molko had also attended the European School of Luxembourg). Molko was performing at a local bar and invited Olsdal to watch him one night. On the strength of Molko's performance, Olsdal decided they should form a band.

While briefly known as Ashtray Heart from a Captain Beefheart lyric, the band quickly settled on the name Placebo. The band could not decide on a drummer at first, with Steve Hewitt and Robert Schultzberg alternating on the spot. While Hewitt was the preferred choice, he also had other commitments as drummer for London band Breed, leading to Schultzberg being the drummer when the band signed its contract with Caroline Records. The band officially says "personal demons" were the reason for his absence. As Molko was having difficulty getting on with Schultzberg, they persuaded Hewitt to rejoin the band in 1996.

Hewitt returned to the band after the departure of Schultzberg. The band gained some measure of notoriety for the sexualities of its members (Olsdal is homosexual, Hewitt is heterosexual and Molko is bisexual) as well as for their excessive lifestyles and Molko's androgynous image, which were often referred to in their songs.

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