It's a bloodbath. EMI, one of the Big Four record companies, home of the Beatles, Stones, Bowie and Kraftwerk, is to gather 2,000 of its 5,500-strong workforce in a strip-lit room, cut off the air-con and execute them one by one with a letter opener. I only hope Cliff Richard escapes the cull.

The chief butcher is a man named Guy Hands, whose private equity firm, Terra Firma, bought EMI for £3.2 billion last May hoping to turn around the firm's fortunes. He hopes the cull will save the ailing giant £200 million a year.

A business man, not a music man, Hands is not well liked. His appearance has led to such diverse protests as Paul McCartney signing his deal with Starbucks, Radiohead doing their honesty box thing and, now, The Verve threatening to withhold their forthcoming album. Robbie Williams, left, is particularly miffed. But the various honest office workers who have now lost their jobs will have less choice what to do with their talents: you can't really sell your management skills on the internet asking clients to pay what they think they're worth.

None of EMI's main rivals - Warner, Sony BMG, Universal - will be chuffed at the news. While EMI seems to have been spectacularly mismanaged, this is symptomatic of industry-wide ill-health in the days of iTunes, the Hype Machine and Billy Bodkins of Iowa burning the new Interpol album for his pals. The Big Four's strategies for dealing with the online revolution - criminalising their customers, imposing digital rights management - have failed; they are all backtracking fast. Rumour has it that one of Hands's schemes involves getting big corporations to sponsor new releases: Coldplay's fourth album, brought to you by BP and McDonald's. As I said, a business man, not a music man. But he has to think of something fast.

Among the general hand-wringing and the horror epitomised by EMI however, there is one pop music success story that has become an unavoidable fixture in the business pages.

You cannot open the paper these days without stumbling upon some gushing article banging on about how nang The O2 is. We all know that despite opening halfway through the year, the rejuvenated entertainment complex was the world's (third) highest grossing venue of 2007. We coo at AEG's ability to attract The Spice Girls and Led Zeppelin to play in their tent. Business types marvel at the deal O2 struck with AEG to rename that vainglorious dome.

As the public loses their appetite to pay for recorded music, they have recovered their desire to watch it played live - for real-life experience  - and as market leader, the O2 has capitalised. A glance at the list of the Top Ten Musical Earners of last year, published in Forbes magazine last year, proves that live performance is where the cash is. A latest record company wheeze, incidentally, is to buy into their artists' performance rights, effectively turning them into management companies.

Is the implication, then, that albums will soon cease to become the mileposts in an artist's career? Will we measure, say, Adele or Duffy's progress not through the silver discs they chuck our way but by their appearances at various arenas?

I used to find the demise of the record industry amusing. But eyeing the emerging model, I am not too sure. On my one unhappy visit I found the O2 to be a clammy, tacky, consumerist hell-hole with all the rock'n'roll credentials of Brent Cross Shopping Centre. The arena itself had muddy, soupy acoustics. True, there are excellent corporate facilities. It provides an all round entertainment experience. It is shortly to host a national Rock and Roll Hall of Fame hosting rare memorabilia from the likes of David Bowie and Arctic Monkeys. But I'm not sure I want to entrust the future of rock'n'roll to company that puts it on the same level as a day at Alton Towers and hopes to build a casino next door.

A glance through EMI's history books, meanwhile, reveals that for all their present woes, they have made an astonishing and lasting contribution to music history. The Beatles, to use the most obvious example, were nurtured and indulged by the company in a way that would be impossible now, but stands to EMI's credit. The last thing a venue like The O2 will promote is innovation - it thrives on bankable dinosaurs like the Spice Girls. The big draw of 2008? Celine Dion.

Resting on credentials is part of the reason why EMI is in such trouble. But finding and nurturing new talent as the company once did is surely the only way out of the present mess. Quite simply, the public will never tire of hearing new music and it is impossible to imagine that a way cannot be found to make this demand profitable. Alas, the way things are going, I fear this is ultimately bound to evolve into a sponsorship scenario not unlike the one outlined above; as The O2's packed hospitality suites prove, corporations love to buy into that creative stuff. And for a band, where's the line between, say, licensing your song for an O2 advert, playing in a giant, Dome-shaped advert for O2 and having your album funded directly by O2 bods who wish to be identified with your rebel schtick? Which, if you think about it means that, in market terms, the idea of rock'n'roll is worth more than rock'n'roll itself.