Last week's biggest-ever New Musical Express awards show at London's O2 Arena should have been a triumph for Britain's longest-serving rock weekly. It was, says the Editor, Conor McNicholas, “one of the greatest nights on my life” watching Klaxons, Bloc Party, Kaiser Chiefs and Manic Street Preachers play to 15,000 indie/rock fans.

But there were glum faces and dark mutterings among the assembled media insiders. One key reason for this gloom was the magazine's circulation figures for the second half of 2007. Averaging around 64,000 per issue, they are the lowest ever, and a steep decline on previous years.

Given NME's growing profile online, on TV, at festivals and branded tours, these figures seem a strange and bitter pill. Some industry commentators are even speculating that the print version could close within months. “Who reads the NME then?” Ricky Wilson of the Kaiser Chiefs singer asked pointedly.

In recent years the annual NME awards have generated lurid headlines for the rowdy antics of Primal Scream, Pete Doherty and Kate Moss. Last week's O2 bash was relatively tame by comparison.

Many present even likened the ceremony to the back-slapping sales conference that is the Brits, although a few lairy revellers sportingly rose to the occasion. In classic NME style there was a scuffle between the writer Alex Miller and the manager of the Young Knives over a negative review. Meanwhile those rock'n'roll Bash Street Kids, Arctic Monkeys, let off a stink bomb before being escorted from the venue when one of their entourage lit up a cigarette. Phew! Punk rock meets corporate hospitality.

“The O2 is a corporate venue if what you mean by corporate is that the toilets aren't overflowing, there are plenty of bars, the sound is great and everyone can see the bands,” protests the former NME Editor Steve Sutherland, who now oversees the magazine's evolution as editorial director of IPC Ignite.

To former writers such as myself, bad news about the state of NME still strikes a strangely personal nerve. Like a lapsed Catholic or former Marxist revolutionary, you can never quite leave the magazine behind, however abusive the relationship may have been.

As it celebrates its 56th birthday today, NME is now a national institution whose reputation for arrogance and aggro far outstrips its relatively benign tone in 2008. Even so, it continues to punch above its weight in profile terms thanks to its hugely successful website, annual Cool List and other headline-grabbing ventures.

Crucially, NME will remain a powerful player as long as record labels and emerging artists view it as an essential stepping stone to radio play and tabloid coverage - which most still do. “People care about the NME awards,” one manager says. “They might despise the paper but they go because they think it's important. It's still relevant.”

Since the invention of youth culture in the 1960s, each generation of British teenagers has grown up feeling that they owned NME and the bands inside. It is a fairly intense and obsessive relationship that tends to end with a messy split over musical differences around the age of 25. Former readers then become like embittered ex-spouses, forever recalling a rose-tinted Golden Age of rock journalism.

“Generations of them, all moaning about how NME stopped being good at the exact moment they stopped buying it,” complains Steven Wells, one of the magazine's star writers in the 1980s and early 1990s. “It must really suck to be an NME writer these days with this bloated Greek chorus of balding middle-aged naysayers on your back.”

Of course, the multimedia “brand platform” that constitutes today's NME is far removed from the inky, prickly, wordy weekly that my generation grew up loving and loathing in the 1980s. The monochrome weekly magazine of my youth was mouthy, pretentious, political and packed with occult knowledge. It was like a deviant careers advisor, the hip young gunslingers of London calling to faraway towns. NME gave me my first and only real job.

An enduring image problem for NME nowadays is how, even 30 years on, it is still judged against its late-1970s heyday. Written with a passion that was often wrongheaded and self-indulgent but occasionally brilliant, it became an unrivalled beacon of outsider attitude and spiky writing. In an era before the proliferation of music media, sales topped 250,000. Writers including Nick Kent, Julie Burchill, Tony Parsons and Paul Morley made their names on its pages.

Even much later, during my relatively calm time on the magazine, NME had its fair share of massive egos, internal feuds and office drug dealers. But Pat Long, a former NME assistant editor who recently left to become content manager for Orange's Entertainment Channels, says it is unfair to measure today's magazine against its mythic past.

“There's a lot of emotional baggage around NME,” Long says “which means when they stage things like the awards at the O2 everyone always complains about how corporate it is and how much better it was in the 1970s when everyone took sulphate in their tea.”

Even Morrissey, a longtime sparring partner who is now suing NME for defamation after a spat over what he said about immigration last year, praised the paper's illustrious past in a withering response to his interview. In terms more akin to a spurned lover than a scorned singer, Morrissey argued that the old NME was “a propelling force that answered to no one”, whereas now it was “very much integrated into the industry”.

Playing out in blogs and post-interview aftershocks, the latest rift in NME's love-hate relationship with Morrissey has been an insight into modern rock journalism. The singer claims in his blog that the interview was premeditated revenge for his refusal to headline the O2 awards show. The interviewer, Tim Jonze, then said that he removed his credit when the magazine's editors actually softened his tone.

It's a revealing exchange that appears to suggest NME is now writing features by committee. Not so, Sutherland insists. “Don't be daft,” he says. “The NME write something by committee? That lot create conflicting manifestos over who should be making the tea!”

The current NME weekly is, admittedly, a much calmer chameleon than during its punky, druggy peak. Packed with soundbites, gossip and promotional branding, it can read like a trainer-bra version of Heat magazine. But a residual fondness remains. Hearing reports of falling sales is like hearing that a cruel but brilliant uncle has been taken ill.

And yet, according to its publishers IPC, the veteran music rag is in rude health. Last week's awards show earned their biggest TV audience so far on Channel 4. Next month, NME launches an American awards show and tour, with a radio channel due by the summer. Even with falling sales, IPC claims that the magazine remains “the heart of the brand” and still its most profitable element.

Of course, bashing NME has been a national sport since even before I first worked there, almost 20 years ago. Routinely attacked for its editorial arrogance and narrow musical agenda, it remains a high-profile target, but rumours of its death are invariably exaggerated.

The key difference nowadays is context. With the demise of any real rock “underground”, plus fierce competition from online rivals and the FaceTubeMyBook boom, the magazine must adapt or die.

To many of its former readers - and writers - NME has sold out its “soul” and “edge” to corporate partners, such as the beer and hair-grooming companies that now sponsor its tours and awards ceremonies. But Sutherland dismisses accusations that the paper is too cosy with the mainstream music industry.

“It's a perennial contradiction in the alternative-minded music fan that, while we want our heroes championed, we also want to own them,” he says. “In the words of Mr Morrissey, we hate it when our friends become successful.”

Sutherland insists that NME has simply become successful alongside the artists it once championed. “NME is not a marginal player. We are a fundamental part of the process of how music works in the UK and, increasingly, across the world.”

But commercial success does not equal cultural relevance, argues Steven Wells. For him, NME's fatal error was sacrificing the “rebellious, politicised, energised, anything-is-possiblism” of the post-punk era to become “the house organ for indie, defined as unchallenging guitar music made by white suburban males”. The result, Wells claims, was “cultural incest. A zoo animal eating its own dung is amusing for a while, but it gets tedious.”

Barney Hoskyns is another 1980s NME veteran, who now runs the online music journalism library, Rock's Back Pages. He is less critical of the magazine's current direction, claiming it had little choice but to become just another “consumer lifestyle” publication.

“Rock is no longer counter-cultural, it's in the bloodstream of the new status quo,” Hoskyns argues. “Coverage of rock is ubiquitous, therefore it no longer requires its own media ghettos. Rock writers have dumbed down, or at least played down, their own quirks and idiosyncrasies to accommodate the above.”

The author and broadcaster Andrew Collins, a former deputy editor of NME, believes that the magazine is a victim of its own success. Once lone cheerleaders of the rock revolution, NME now competes with countless clone publications. “Unfortunately, NME doesn't really have a unique sales proposition any more,” Collins says. “Many of the indie artists it has hitched its wagon to have become public property, whether it's Arctic Monkeys or the Killers or Kate Nash or the Klaxons or even Pete Doherty.”

IPC has responded to NME's poor circulation figures by announcing yet another revamp. But perhaps it is simply wrong to interpret poor sales as a crisis in this post-print age. Even if its weekly cousin loses readers, the magazine's online presence continues to expand, recently surpassing the monthly benchmark of two million "unique users". Pat Long insists that NME deserves credit as a pioneer of blogs, online news and web videos.

“The future will see more focus on that content being sold to third parties with the magazine used more as a focus to hold the different brand platforms together,” Long predicts. “The problem is it's difficult to talk about things like brand platforms without imagining Nick Kent somewhere, sobbing.”

Sean Adams, the founder of the rival online music site Drowned In Sound, concedes that the NME website is moving in the right direction by concentrating on “agenda-setting news pieces”. He envisages the print version becoming an in-depth “director's commentary” digest, while its TV and web cousins cover new bands and newsy soundbites.

“I can't see it staying weekly or in its current form,” Adams says. “A bit like Top of the Pops, I don't think anyone in our world would ever have imagined a day it would be over, but ironically I actually think a magazine-style TV show aimed at both older readers and placating a new generation could be where NME may end up.”

In an instant-access online music climate, says Collins, NME could arguably dispense with its “paper souvenir” version altogether. “You could be an NME fan and just click on the website and go to the concerts and watch the TV channel without ever flicking through the magazine itself.”

But Sutherland dismisses speculation about closing the weekly magazine, at least for now. “Am I married to print on paper?” he asks. “Would I weep buckets if, in 20 years, NME was talking on a minute-by-minute basis with millions of music fans all over the world but the magazine had passed on? Personally, no. Do I believe that will happen? No again.”

Put simply: the NME is dead, long live the NME. For now.

The NME: a chequered history

1952 The Musical Express and Accordion Weekly is relaunched as the New Musical Express. It is Britain's first paper to include a singles chart.

1963 The televised Poll Winners Awards are launched. Moving with the times, the paper champions the Beatles and the Stones. Sales reach 200,000 a week during the latter part of the decade.

1972 Taking its cue from writers such as Lester Bangs, a revamped paper is saved from closure. With an influx of “underground” stars such as Nick Kent and Charles Shaar Murray, it ditches its “trade” associations. Weekly sales rocket to 300,000.

1976 As punk rages, an advert for “hip young gunslingers” brings in Julie Burchill and Tony Parsons.

1978 The future editor of The Face, Neil Spencer, takes over. The paper takes on a political voice.

1985 Competition from Melody Maker and Smash Hits and in-fighting mean another nadir.

1990 Acid House, Madchester and then Britpop see fortunes revived. Sales peak at 120,000 a week.

2004 Conor McNicholas becomes the Editor. The paper is relaunched as a glossy magazine.

2007 Sales fell 12.3 per cent to 64,033.

2008 NME hosts its largest awards gig at the 02 Arena.

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