Once it was the dream of every new band to be signed to a big record label and secure a fast track to huge album sales and the celebrity firmament. But now it appears that such “stardust deals” don’t make sense.

In the latest signs of the seismic shifts in the music industry, television viewers will see an indie band succesfully pitch a homemade album to one of the Dragon’s Den investors on BBC Two, the day after McFly gave away their latest CD with a Sunday newspaper.

To music purists it may seem bizarrely commercial, placing the investor above the A&R man, but as CD sales slump and the grip of big record companies weakens, musical strugglers and megastars alike are seeking alternative ways of making and distributing their music.

Radiohead told fans last year that they could download the band’s new album, paying whatever they liked. Amy Winehouse plans to start her own record label when her contract with Island Records expires. And now Hamfatter, a band from Cambridge, have made an entrepreneurial pitch for their future on Dragon’s Den.

Viewers of the show, which specialises in unusual and eccentric inventions, will see the band receive £75,000 from Peter Jones, the businessman worth £300 million, to make two albums in exchange for a 30 per cent cut.

They earned their financial backing after performing a one-minute extract of their best song, followed by a two-minute pitch. The panel of businessmen questioned the band for more than two hours off camera before Mr Jones made them an offer, investing about ten times less than a big label deal, but allowing the band total control over how their songs were recorded and produced.

Eoin O’Mahony, Hamfatter’s lead singer, told The Times: “We released a single last year that got to No 53 in the charts and we did have some record label interest but the deals were ludicrous. They absolutely screw you.

“They only offered us about 30p per album. You have to sign away any right to how your songs are recorded and you have to pay your advance back. You can end up owing the label hundreds of thousands of pounds.”

O’Mahony added: “We are hoping that we will never have to get a major record deal. No one else will be able to follow this exact route again but I don’t see any reason why more entrepreneurs won’t get involved like this if we are successful.”

Industry experts said that the deal could mark a turning point in how new music is made.

Alan McGee, manager of Creation Records and the man who discovered Oasis, said that Hamfatter’s deal was typical of the music industry’s move away from big record labels.

“All record companies do is f*** up bands’ careers and get in the way between the musician and the fan,” he said. “Now that no one buys CDs any more bands are realising that they don’t need them. It’s anarchy in the UK.”

CD sales in Britain fell 10.6 per cent last year, encouraging artists to prioritise live performances over album sales. Artists such as Radiohead and the Charlatans, managed by Mr McGee, have even given away their music for free.

“Record labels were traditionally focused on selling records,” Mark Sutherland, global editor of Billboard magazine, said. “Now that’s declining as a source of income, artists are trying to concentrate on gigs.”

A number of venture capital companies have sprung up recently allowing “angel investors” to support new music and reap a percentage of an artist’s output, including live performances. Jamie Turner, Hamfatter’s manager, now plans to set up a similar company for less established acts.

For newer bands who have global ambitions, however, the support of a record label remains important. Enter Shikari, the St Albans rock band, made British top five with their self-released album Take To The Skies in March. But they signed to Universal Music’s imprint Interscope for their US campaign.

Mr McGee advised Hamfatter to follow his example and give away their albums for free. “The only people who think that music isn’t free any more are the f***ing record companies,” he said. “Even if you put your album on iTunes, 10,000 Russians will have illegally downloaded it within five minutes. We gave the last Charlatans album away and it boosted our live performance revenue by 400 per cent. It rejuvenated the band.”

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