Last month, Whitney Houston played her first British gig since beating the drug addiction that almost ended her career, yet fans keen to find out how she fared were disappointed. Her performance was neither broadcast nor reviewed in the press, and not even a snippet of wobbly phone footage found its way onto YouTube.

Why? Because Houston’s hour-long set in south London took place at an invitation-only charity ball, for which the singer was reportedly paid more than £1m by a mobile-phone billionaire. If Houston’s forthcoming comeback album fails to set the charts on fire, a lucrative future belting out her old hits at similar events is assured.

As record sales and royalties diminish, pop stars looking to fund lavish lifestyles are turning to new sources of income. In 2007, reunion gigs were all the rage; 2008 is shaping up to be the year of the private-party performance.

In the early Noughties, just a handful of famous musicians were available for hire, and often only rarely. Today, celebrity agents Grabow in America offer everyone from Dolly Parton, Dixie Chicks and Bob Dylan to Coldplay, Foo Fighters and the Beastie Boys. If you have the cash, Beyoncé will play your son’s bar mitzvah and the Rolling Stones could be the band at your birthday bash.

This year, barely a day has gone by without tales of pop stars playing intimate gatherings for wealthy guests. Madonna is rumoured to have been offered £5m to make her private-party debut in Dubai in November, while Elton John is allegedly mulling over a £2.6m offer to tinkle the ivories at a hotel opening in Moscow. Despite bailing out of her tour, Amy Winehouse sang at two fashion parties during Paris fashion week, netting her about £1m in total.

“In the past couple of years, it has become almost essential to have a pop star perform at your party,” says Hannah Sandling, a celebrity stylist who has seen everyone from Tom Jones, Diana Ross and Dionne Warwick to Justin Tim-berlake at functions limited to a few hundred guests. “It used to be that a decent cover band would do; now people expect the real deal. Mostly, it’s black-tie functions – after a sit-down dinner, you congregate in a room for the entertainment. It sounds stuffy, but the atmosphere is electric. Just to be that close to a star is such a buzz. I was at the Whitney gig and she was just a few feet away, dripping in diamonds. I do like regular gigs, but these are much more exciting.”

The point, says Sandling, is to throw a party that people will talk about for months and to guarantee that all those invited actually turn up. “Having a pop star is a real status symbol,” she says. “And it’s addictive. Say you book Diana Ross for your wife’s birthday, then, two years later, she turns 40. What do you do? Book a bigger star.”

As the private-party circuit has become a serious source of income for acts, the stigma attached to it has all but evaporated. Sugababes perform at up to 15 such events a year, and their manager, Mark Hargreaves, says the girls consider it a compliment to be asked. “The huge amount of money paid is just proof of how popular Sugababes are,” Hargreaves says. “For cool indie bands, it’s not particularly credible, but for pop groups, it is no longer frowned upon.”

Typically, Sugababes play a 30-to 45-minute set of their greatest hits, either live to digital audio tape or, for a larger fee, with a full band. “Our production team visit the site in advance to advise the client on what is possible at the venue,” explains Hargreaves. “These shows are not in typical event halls. They could be in hotel function rooms, marquees or people’s own homes. Some go to great lengths to recreate a live venue – I have seen amazing stages built in vast back gardens and nightclubs erected in the grounds of stately homes. A place like that is a pleasure to play.” He won’t confirm what the girls have been paid for particular gigs, but their fees are estimated to vary between £100,000 and £250,000. Girls Aloud can also expect £250,000.

Included in the fee is an expectation that artists will “mix’n’mingle” – chat to the hosts and their VIP guests, pose for photos and sign autographs. What partygoers can’t do, however, is discuss the party with the press or sell the pictures on. “Guests have to sign a confidentiality contract,” says Hargreaves. “That is standard with every act. It’s not that anything particularly exciting happens, it’s just good business sense to control our own PR.”

Sugababes have cashed in on the fact that the type of artists booked for private parties is changing. In the past, it was middle-aged bankers and financiers shelling out for the now conservative stars of their youth, but now it’s dotcom millionaires, footballers and Russian oligarchs opting for edgier entertainers. Last month, Roman Abramovich shelled out £185,000 each for Mercury prizewinners Klaxons and sexy Brazilians CSS to perform at his daughter’s birthday. In February, a Californian computer-games tycoon paid £15,000 for an exclusive set in Pete Doherty’s own, blood-spattered home. Mind you, the latter may have been miffed to hear that, a few weeks earlier, Doherty had accepted £100 from a regular dad to play at his daughter’s birthday party.

“Doherty is a perfect example of how the private-gig market is shifting,” says Richard Davies, a former music-industry executive turned internet entrepreneur, whose latest venture aims to make private-party performances from pop stars available to the masses. “At one end of the scale, you have your Dolly Partons and Celine Dions. At the other, which is still in its infancy, are cooler, younger pop and indie acts, who are obviously a lot cheaper.”

A fortnight ago, Davies launched owngig.com, a website on which ordinary fans can bid for pop stars to play intimate events. The site brings together people with similar tastes in the same geographical area. If enough people pledge sufficient money to book, say, the Last Shadow Puppets or Rick Astley (currently among the most sought-after acts), they contact the artists’ management and attempt to set up a show in an unusual venue. “We’re looking at artists in the 20-to 40-grand price bracket,” says Davies. “They may be on a UK tour anyway and we would persuade them to add an extra date, possibly somewhere they have never played before.”

But why would fans pay a premium if they could catch the act on tour? “People already pay a premium for tickets from touts,” says Davies. “The average price for a secondhand Led Zeppelin ticket last year was £5,000. Fans are prepared to spend a lot of money for a one-off event in an intimate venue, particularly with the opportunity for access to the artist.”

Would Radiohead, another act listed, really play a private party? “We have spoken to dozens of agents and managers.

Not one was not interested,” says Davies.

“We have not approached Radiohead yet, but reckon we’ve more chance than a billionaire hosting a black-tie event. If it is for the fans, rather than the money, they might be persuaded. Besides, ours would be the far cooler gig.”

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