In early February 1982, a decision was made by Osbourne’s management and record label to record a live album consisting entirely of songs he had recorded in the 1970s with Black Sabbath. Several factors led to this decision. Sabbath’s publishing deal with their previous management had recently expired; by re-recording these songs all the songwriters (including Osbourne) would benefit from the publishing royalties. Additionally, Jet Records had cut a distribution deal with CBS Records which saw the small label stand to make a sizeable profit. Business decisions aside, Black Sabbath was also readying its own live album release and Osbourne wanted his album in stores first. "We were both going through our own miseries," recalled Sabbath bassist Geezer Butler. "We couldn't afford not to release Live Evil and Ozzy was forced into making Speak of the Devil."
The plan to record an album of Black Sabbath covers was not met with enthusiasm by Osbourne's band. Guitarist Randy Rhoads and drummer Tommy Aldridge refused to participate, feeling that they had established themselves as recording artists and such an album would be a step backwards professionally. They shared their feelings with bassist Rudy Sarzo; though Sarzo wasn't completely comfortable refusing to participate, he chose to stand with his bandmates and the trio informed manager Sharon Arden of their decision.
Though Sharon took the news reasonably well, Osbourne was furious. He responded by going on what Sarzo described as "the worst drinking binges I had ever witnessed" and his relationship with Rhoads never fully recovered. It was during this tumultuous period that Osbourne was infamously arrested for drunkenly urinating on the Alamo. Several hours before the Alamo incident, he drunkenly fired the entire band (including Rhoads), though he later had no memory of doing so. Osbourne frequently confronted Rhoads on the tour bus and taunted him with claims that the likes of Frank Zappa and Gary Moore were willing to replace him for the live album. Osbourne's unstable and confrontational behavior soon convinced Rhoads to leave the band. He grudgingly agreed to perform on the live album but would depart after fulfilling his contractual obligations to Jet Records, which consisted of one more studio album and subsequent tour.