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Well, let's look at subscriptions. Short of people paying one month's fee for every song in the world, then buggering off, and between the other model where people feel it's a tax, isn't there some kind of middle ground? Tiers of service?

Absolutely, no problem. But what we learned from Radiohead is that so many people won't pay for anything. It would have been really clever of the P2P community to show that when music is for free, there's zero piracy. They should all have paid something sensible, two pounds for the album, and look at what a message that would have sent. When I rang record companies to make savings, we never cut back on A&R investment – but now you're beginning to feel it. There's not enough new music around.

I always threatened this would happen, I hoped it wouldn't, but it just feels like it, and there's a scarcity now.

Or a super-abundance?

It's not bad quality stuff that's around, but you do want marketing, you do want promotion; people do want filtering when there's so much choice out there.

I see things being good for the amateur now – and great for the millionaire artists. In fact we have millionaire artists telling us we should all get poorer, like Radiohead's Thom Yorke. But they can cut 360 degree deals, they can cut the record company out. Radiohead made a lot of money with people paying twice.

The physical release they'll have made a lot of money from.

They made a lot of money from the digital preview release, too – especially from overseas sales which they kept a larger proportion of than with a traditional deal.

Yes, absolutely.

But if you're in the middle, then what?

I have a history on this.

Years ago, I represented the Stone Roses to get them out of their contract. Having got them out of their contract, when George Michael wanted to get out of his contract, he wanted me to help him. And I had a choice in two days whether I would help the artist or the record company. And to everybody's astonishment, I chose to give evidence for the record company. The reason I gave was this.

I was representing artists on a daily basis who were coming from tenement buildings in Glasgow, and were getting record deals and touring the world, and making money, and having a career out of this. If every contract could be broken when it suited the artist, then record companies weren't going to do this anymore. So to my mind, the Stone Roses should get out of an unfair contract, but George Michael shouldn't be able to get out of a contract for which he got a £10m advance, and which had been renegotiated four times. Because that's not the way this deal works.

Record companies have to get a return, and the people in between need big investments. One of the unfortunate things with the way the music market has gone is that companies spent all this money but only took a return on one stream, the recorded stream. And now the 360 degree model, which is a necessity of the current market, means that artists will have to share all these streams to get the investment. But that's always a healthy choice - they can do it, or not do it.

But I can picture myself now, representing an artist, and he's asked to share all those revenue streams. He'll say, "what's the alternative? That I go back to the tenement and play in the pub every night? Or I have this chance to make a career." That's a fact that the market has become so much tougher.

[EMI owner] Guy Hands is saying we can't afford to splurge so much money on so many artists. What does that mean for the future?

When I first put out a record, I found we'd typically pay a fortune for tour support for a UK guitar band to tour Germany, even with the local record company wanting the band to go there. So I cut back on those monies.

One of the things Guy Hands has said was that we should market research products more before they go to market. In the film industry this has always been done. When you see a film you do it on the basis of one viewing. With music, almost everybody hates things they hear for the first time, likes things a bit more the second time, and by the third time, they're hooked. So you've got to be very careful when you market research music and make sure you do so over a sustained period of time – radio has been very good at that. Not discovering new music, but taking it to their listeners. You should do more market research, look at your demographic, and reduce your marketing to make it more focussed. That's been a weakness.

But if all EMI will be doing is looking at Facebook, which he said they should be doing, where's the A&R expertise in that? Everybody's looking at Facebook!

The great A&R men are just fantastic, but there was never a serious number of great A&R men.

If you want a lesson in the great extreme A&R-ing, take a look at the Atlantic Story - the DVD is a work of art. Ahmet Ertegun was a pure genius at finding talent and respecting talent. There are talented A&R people out there, a few, but too many people were given big salaries when they weren't that talented and didn't have that track record. So what Guy Hands is doing is absolutely right in pruning, and you need that expertise. ®

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