ROCK / Happy Christmas - you're fired: 'Tis the season when the record companies tighten their belts. And for some artists, all Santa will bring this year is the sack. Giles Smith reports

Last month, a band called Pop Will Eat Itself returned from a tour of Europe, where they had been the opening act on shows by the group EMF. These were the band's first European appearances for five years and their record company in London, BMG / RCA, had instructed its foreign offices to, in music business parlance, 'get vibed up' about the tour - print advertising posters, organise television appearances, secure interviews with the press, generally spend some money and make a splash. The foreign offices got very vibed up indeed and generated for Pop Will Eat Itself an unusual amount of interest. So the band came home happy, imagining their next single would become their eighth to make the Top 30, and generally assuming things were set fair, right up until the week before last, when their record company fired them.

Odd though the timing was, BMG / RCA claim their decision followed some simple maths: during the band's years with the label, the record company had spent more money on the band than record sales were ever likely to repay. Time to 'free the band from their contract', as the euphemistic phrase of choice has it. In one respect, Pop Will Eat Itself come out of this well: they get to walk away from their debts and start from scratch somewhere else. But they now carry a stigma: they are a dropped band.

It's not unusual for record companies, during the festive season, to slim down their rosters for the new year by quietly dispensing with the services of acts that have not quite worked out - that dodgy father and son synthesiser duo, perhaps, whose first single peaked at number 89; or that thrash-jazz band from Chelmsford who wore different coloured duffel coats. But in the run-up to this Christmas, it is not just the turkeys that have been getting it in the neck.

Take the mysterious sacking of Julian Cope. His most recent album, Jehovahkill, seemed to go down well, a compilation of his older recordings was keeping his profile aloft, and his tour was a sell-out. But that didn't deter Island Records from terminating Cope's contract.

Cope's spokesman says, 'The ironic thing is, Julian's probably more popular than he's ever been. He's sold out four dates at the Town & Country. If he had been prepared to do certain things, he would still have his contract. But Island didn't want another sprawling epic from him. They wanted something more commercial.' Right now, even an uncommercial, sprawling epic by Cope would sell moderately well: but right now, moderately well is not enough.

'We're not able to risk a punt anymore,' says Dave Bates, Head of A&R at Phonogram. 'It can cost you up to half a million to take a new act through to an album and a tour. That's why some labels panic and only sign bands who've got the right haircut, the right lawyer and know Janet Street-Porter.'

Bates has recently seen two of his favourite signings snipped from the roster: Love & Money ('I was the patron saint of Love & Money') and The Fall. 'Losing The Fall was incredibly sad because, for the first time, they've made two impressive albums back to back. But they haven't sold. Ordinarily, you would think The Fall are such an important band, you couldn't lose them. Not now. If I don't let them go, and I lose a vast amount of money, do I let staff go instead?'

When the record industry pleads poverty, the public should hardly be expected to heave a sigh: it still generates enough cash to float a sophisticated navy. But as the recession sinks its teeth in, the industry grows ever more cautious with its stash. For the most part, the artists at the top are safe from the effects of this. George Michael may recently have decided to sue his record company, but there's a swathe of artists lower down the pecking order who are soon going to be wishing they had a record company to sue. What will be the fate of, for instance, the Wedding Present who have a solid but static following? Their contract (with BMG / RCA) is up for renewal in March: nobody at their level of achievement - significant, but not blockbusting - can afford to feel comfortable in these times.

Nowhere is the evidence of urgent slimming more evident than at Virgin. Since the takeover by Thorn EMI in March this year, the Virgin label has virtually halved its artist roster. Perhaps the company was more fit for the scissors than most, having gone through a period of reckless expansion in the 1980s when it often seemed its executives were so chequebook happy they would sign buskers on their way into the office in the morning.

Following Virgin's most recent purge, out go The Railway Children and the Mock Turtles, acts that never really made it off the launch-pad. But out too go InEner City, the popular dance act; and out goes John Lydon's PiL. THER write error (Virgin says the records weren't selling: Lydon says the record company had stopped promoting them.) PiL join the Human League, dropped by Virgin in August (by letter, incidentally, and after a long period of silence). The Human League had been enormously successful for Virgin, but their somewhat low-gear approach to the recording of albums (they averaged, roughly, one every four years) caused accountants some alarm. 'You can't say Virgin didn't stand by that band,' says Rob Manley, the head of Virgin's dance A&R. In these times, though, the presence of mavericks can apparently no longer be sustained. We may be heading for a time when the only recording artists left are either megastars or cheap, one-shot singles artists.

(Photograph omitted)