Change in direction and Happiness
Havard left the band in July 1987. The remaining three members began work on a new album. However, due to a lack of money to produce the album, it was shelved and Gausden departed in late 1987. Back down to a duo of Marsh and Waddington only, The Beloved began to embrace a dance sound more wholeheartedly after taking influence from freestyle and hip-hop music in "Forever Dancing". Now signed to WEA (now Warner Music Group), the single "Loving Feeling" was released in October 1988. It did not fare very well in the charts but its B-side "Acid Love" garnered moderate success in clubs. The single "Your Love Takes Me Higher" was released in January 1989 and did not chart but was more successful than "Loving Feeling", peaking at number 91 on the UK Singles Chart. In October of the same year the single "The Sun Rising" was released and became a club favourite, crossing over to the UK top 40, peaking at number 26 in November 1989.
This was followed in February 1990 by their first studio album, Happiness, the first and only album Marsh and Waddington released as a duo, and the first consisting wholly of previously unreleased new songs, from which the hit single "Hello" was also released. "Hello" became The Beloved's first international hit, and reached number 19 in the UK. This song's lyrics mostly consist of names of real or fictional people, groups and institutions, representing the band's wide-ranging selection of heroes, villains, and a few of their friends. Saint Peter and Saint Paul, house music with Kym Mazelle and Paris Grey; literature with Jean Paul Sartre rhymed with the writer and disgraced former politician Jeffrey Archer; talk radio with Brian Hayes and Marsh's childhood hero, Crystal Palace FC football player Vince Hilaire. The LP included two more singles, a re-release of "Your Love Takes Me Higher," which this time made the UK top 40, and the final cut, "Time After Time", which was only a minor hit in the UK, reaching number 48.
A brand new song, "It's Alright Now", which also failed to make the top 40, stopping at number 48 in the UK, was released to promote a remix album, titled Blissed Out, released in November 1990. Almost all of the songs from the Happiness album were featured on Blissed Out in one or more remixed versions, along with another mix of "It's Alright Now," and some previously exclusively non-album tracks. The work was released in three different editions, varying in length and track listing, depending upon the format. The vinyl LP, the shortest, includes 8 tracks; the CD version features 11 tracks; and the MC edition contains 16 tracks.