Simon Napier-Bell tends to start sentences with "On our third, fourth - maybe fifth - bottle of red wine ..." or "I was in a nightclub in Bangalore drinking cocktails at three in the morning ..." On this occasion he begins as follows: "One night with Andrew Ridgeley we drank eight bottles of champagne and ended up in an Egyptian belly-dancing club in Queensway, as one does, where we poured the last bottle over our heads in a sort of bonding situation. And we had to get home, which was difficult because we were falling over and covered in drink and I said, 'Let's sleep in my Bentley till we're sober', me in the front, him in the back. But the car somehow started itself and set off - as cars do when you're drunk at four in the morning - so I said to Andrew, 'I think it'd be safer if we went on the pavement. So I drove from Queensway to Marylebone on the pavement and it was only when I was crossing the zebra crossing at Bryanston Square, only then did the police turn up. Andrew ran away and I was arrested. My lawyer said, 'Don't plead guilty; they've made a mistake with the paperwork,' and he got me off, case dismissed. I asked him what I should have got and he said a £40 fine and forbidden to drive for two years so I gave 40 quid to Oxfam, sold my car and didn't drive for two years.

"I told George Michael this story and he said, 'That's disgraceful. You should have been punished and sent to jail!' George always lectures people," he says, laughing to himself.

"He's terribly moral."

What would George have said now, I wonder, after being so stoned in 2010 that he famously drove his Range Rover into the window of Snappy Snaps in Hampstead?

"Ha! He'd go, 'Naughty George!'" Napier-Bell, who managed Wham! in the Eighties, slaps his wrist theatrically. "He's incredibly sensible and incredibly stupid all wound up into one - as most artists are. He's the cleverest, smartest person ... but if he's so clever, why does he smoke and take silly party drags and drive cars through shop windows? He never meant to be in Wham! in the first place," he adds. "Wham! was Andrew Ridgeley and never anything else. When George was 13 he was a podgy little Greek boy with curly hair and glasses and sat next to the handsome lad of the class - real cowboy stuff - so he bought a hair-straightener and thinned himself down and got some contact lenses and became a second Andrew. He wanted to create a group but he never saw himself in it - he was the Svengali and the songwriter, and Andrew and some other guy would be the band. So when he couldn't find the second person he thought, 'I'll join the group and act the part for him, it was like a movie. Which is why he was right not to come out at the time, because he wasn't George - who was gay - but a copycat Andrew."

Napier-Bell, famously, once thought of suing someone for suggesting he was heterosexual. "Well, Brian Epstein had fallen in love with me and got in a flutter and took a lot of sleeping pills - I wasn't having an affair with him but his last message was to me. And the Mail did a thing on it and they printed a picture of me and Epstein and said I wasn't homosexual. And I thought it made me look dishonest, as if I'd been lying all my life."

But your books reveal you slept with a lot of girls, so why didn't you think you were bisexual? "Because you just know! Bowie said he was gay when he was actually bisexual and came up with my favourite line of all time: when some writer asked him in '72 why he was going on tour wearing a girl's frock, he said, 'It's a man's frock!' I'd go to clubs in the Sixties and get drunk and wake up the next morning and there'd be this gorgeous-looking girl beside me and I'd say, 'Look, here's five quid, would you mind getting dressed and getting a minicab home?' And then another morning I'd turn over and there'd be some spotty-looking guy with black teeth and I'd say 'Can I make you breakfast?' You know you're gay. It's in your bones." I look around this low-lit bar in the Kensington Hilton, at the mid-afternoon meetings in a haze of lounge-jazz, and think what a shame they can't hear us. The world's highest-grade rock'n'roll gossip and the only person listening is me - and we've still got the Marc Bolan and Japan years to come. I feel like standing up and shouting, "Do you know who this person is? This, people, is the tirelessly decadent Simon Napier-Bell — manager, rogue, songwriter, theorist, string-puller, gastronome and loose-lipped bon vivant who's met everyone in six decades of the pop industry and has a hair-curling story about all of them. Yes, him! For God's sake, pull up a chair!"

You'd expect Napier-Bell to be a flamboyant type in a candy-striped blazer and felt hat, but he speaks in a soft and ceaseless stream full of waspish asides, his eyebrows dancing with delight and feigned surprise, an untouched pot of tea beside him. And he's impressively young-looking for 75, a well-built, almost boyish figure in a slate-grey linen jacket, his unlined countenance a glowing testament to many relaxing hours in expensive restaurants. He made his name managing the Yardbirds and co-writing the lyrics to Dusty Springfield's You Don't Have to Say You Love Me when he was 27 and declared he'd retire at the ripe old age of 30. And he did. And it didn't work out.

"I had a house built in Spain, beautiful place with a pool and guest suites, and I sold up and moved there," he recalls. "I was bored stiff. Got very drunk, danced alone to Rolling Stones records, fell asleep on the sofa. After three days I called up an estate agent and told him to put the place on the market. I missed it all - the travel, the argy-bargy, the interesting people."

You can't imagine why he ever thought this would work, someone so magnetised by drama that he's spent the vast majority of his colourful life finding wildly ambitious people and shepherding them towards success, celebrity and - very often - outrage. People like Marc Bolan. Mention a name, you light the blue touchpapcr and he's off again.

"Marc rang me up and said, I'm a singer and I need a manager. Would you like to hear some of my songs?' and minutes later he was knocking on my door - tiny character, like a Dickensian urchin, guitar slung over his shoulder. He chose the biggest of my armchairs, disappearing into it, and sat cross-legged and played every song he'd ever written. And I was utterly fucking entranced. I booked Kingsway Studios and we drove over and recorded them all. Then we went to dinner and talked for two hours and went back to my place and went to bed. He said, If you're going to take 20 per cent of my income, I want 20 per cent of your brain,' and he stuck his tongue in my mouth."

How did you start making him a star?

"I told him he needed to join a group so the world could get used to his little vibrating voice and encouraged him to join John's Children. And they went on tour with the Who in '67 and stole the show. We bought some chains and a kilo of feathers and shoved them in the back of my Bentley. The other singer, Andy Ellison, showed the audience how to break their chairs and they filled the whole place with feathers and then whipped each other with chains and smashed the drums. Marc loved it. And then the Who came on and Roger Daltrey couldn't sing because he'd got feathers in his throat and the chairs were all broken and the audience were exhausted. And their manager, Kit Lambert, said unless we changed our act we were off the tour. And we did it again the next night and Kit called the police - and these were Nuremberg riot police, a bad lot - so we had to take an alternative route back to England in case they were following us."

David Sylvian of Japan must have been a little less exacting. "Five years of my life I spent breaking that fucking band," he says in measured tones, "but Japan became the most influential group of the Eighties. Then David said, 'I don't want to be a rock star. I don't want to be famous. I just want to be a kind of Left Bank poet, known and respected a bit' - a gorgeous David Sylvian moment. That should have been the guy who drove his car into Snappy Snaps; George Michael should have gone through the front window of Harrods!

"The only thing to look out for as a manager," he adds, "is that the musicians you represent have a total, obsessed, near-suicidal need to be a star. Nothing else matters. The energy and push that makes an artist a star comes from them, not you. You latch yourself on like a jockey on a horse: the horse runs, you pass the wanning post and you get your 20 per cent. And when you ask them what they want, they say they want to be successful - they don't say, 'We want to have our spots cleared up or be psychoanalysed' - and to do that very often we turn them into monsters. We cut them off from every aspect of normal life and put them in hotel suites and pack them in cotton wool, an enclosed world with a crew around them. And we put them in limousines and separate them from their public and send groupies and drugs and drinks to their rooms and eventually they find the whole thing ... not very nice. They get unhappy. They get miserable."

And then they blame the manager.

"And then, yes, they blame me! But that's the job they asked us to do." Don't you think a lot of musicians need love and approval because they were starved of it when they were young? John Lcnnon, Tom Petty, John Martyn, all seemed to be trying to prove something to fathers who abandoned or rejected them. Roger Waters of Pink Floyd, whose father died when he was five months old, once told me, "Musicians have holes in our psychology that only adulation can fill."

"Precisely. A lot of them have suffered some kind of abuse -1 mean abuse inflicted by circumstance, not some old man touching them. When he was nine, Eric Clapton discovered the girl he thought was his sister was his mother and his 'mother' was his grandmother and the reason he wanted adulation in the Yardbirds was because he needed it. Madonna suffered terrible abuse that nature heaped upon her. There was no suggestion that anyone was unpleasant to her, but she suffered horribly. Her mother died when she was five and she was taken to see her lying in an open casket, as if she were asleep, and noticed her mouth had been sewn up. She said, 'That final image of my mother, peaceful yet grotesque, haunts me today.' She was terrified her father could be taken from her and refused to go to sleep unless he was next to her, and resented the housekeepers he brought in because she felt they were replacing her mother. And when he married one of them and had two children by her, Madonna loathed him for ever and thought she was utterly alone. At school she did anything she could to put herself at the centre of attention, did cartwheels in the hallways, swung by her knees from climbing frames in the playground, pulled up her skirt in class so boys could see her panties."

This is textbook Napier-Bell. Beneath the barbed humour and immaculate observation lies a meticulous level of analysis. Never has anybody had so much fun, remembered it so precisely and made so much sense of it all.

His 1998 memoir You Don't Have to Say You Love Me and 2007 romp, Black Vinyl White Powder, are warm, funny, first-hand accounts of his working life in an industry rammed with buffoons and egomaniacs, but his latest book, Ta-Ra-Ra-Boom-De-Ay, is a sharp, fast-moving and beautifully written popular history spanning three centuries of wheeling, dealing, horse-trading, cigar-chewing enterprise and skullduggery. Take the jacket off and there's a message embossed on its hard cover: "WELCOME TO THE MUSIC BUSINESS: A WORLD OF GREED, CORRUPTION, SELF-INTEREST AND FUN". He took three years to write and research it and read nearly 2,000 books in the process. One constant theme since the 18th century is that every artist attracts a raft of devious business folk - song-sheet salesmen, publishers, agents, managers, promoters, film moguls, record execs and, eventually, digital file and stream vendors - all trying to claw as much money as possible from their catalogue. Has that ever really changed?

"It hasn't changed - it's just getting hold of something valuable and then trading it, like stocks and shares," says Napier-Bell. "What's changed is the 10,000 per cent profit record companies used to make from vinyl and, later, CDs. Obviously you needed a song, a label and an artist's name on the front but, broadly, you could sell a slab of vinyl that cost a penny for ten pounds, a vastly inflated price, and that made them incredibly rich and incredibly fearless with their money — cocaine and overpaid executives, huge buildings in every city. And that's why record companies never really respected artists properly: they were just one ingredient in this monumental mark-up."

Napier-Bell's theories tend to be built around the largest and most fascinating characters, one of my favourites being Eva Tanguay, the mesmerising American showgirl who, he claims, even in her heyday of the early 1900s, was the first artist to really understand the value of even bad press.

"Onstage she slurred, screeched, cackled, poured bottles of champagne on her head, danced like a demon, shimmied her breasts and sang bawdy tunes with titles like Go as Far as You Like. She had a dress made from four thousand pennies. Her smallest costume was just a wisp, her bra just an encumbrance. Anything that happened to her she used for publicity: when a fellow dancer walked in front of her as she hurried to a dressing room, she stabbed her in the stomach with a hatpin; when the police arrived she made sure she got in the papers by throwing them a roll of banknotes and wailing, 'Take it all and let me go for it is now my dinner time!' Her father had died when she was six and, from then on, she sought constant attention. She fell in love with notoriety. Her stoiy was the template for creative artists before and since: the need to be in the public eye and feel the love of an audience triggered by childhood misfortune and wretchedness - from Irving Berlin to Ethel Waters to, once again, Madonna."

Today's music industiy, he says, isn't in decline but simply changing, the profits now made in a variety of ways such as internet radio royalties. But it's just as exploitative and "the last form of indentured servitude". And artists are still queuing up to sign contracts. He quotes Tom Waits who said, "People are so anxious to sign, they'll sign anything. Like going across the river on the back of an alligator."

"The business was at its best in the Sixties and Seventies when very clever businessmen who loved music were running it," says Napier-Bell. "They wanted to make money, but they wanted fun, to drink and take drugs and hang out with musicians. Then it got taken over by people with no interest in music whatsoever."

The best - or worst - example of this, he says, is Guy Hands, who made a fortune buying up motorway service stations in Germany and installing bathroom facilities, later heading up the private equity giant Terra Firma who in 2007 took over EMI Records, venerable home of the Beatles, Queen, Radiohead and Pet Shop Boys. Only when some of his artists objected to his coldly commercial approach - and told him so and left, reducing the share value - did he learn that musicians couldn't be managed like pipes and washers. "He learnt," as Napier-Bell drily notes, "that sometimes shit is better swallowed than flushed away. Robbie Williams's manager was furious when news was leaked that Hands had authorised the sale of a million surplus copies of Robbie Williams' Rudebox album to China to resurface roads.

"But the thing about the music business now is that everybody knows how it works. And this is very strange when you get a group like One Direction. All these young kids know how this group's been manipulated onto them, how it's been put together, but they still accept them."

Maybe it just shows there's always an appetite for teen fantasy and that's stronger than any understanding of how it's being sold - whether it's the Bay City Rollers or One Direction?

"But previously there was a manipulation and they were the object of it; now they know they're the object of it and they still want to fall for it! One Direction is one of the saddest examples I've ever seen. It's horrific. I listened to their new record - what's it called? - Midnight Memories - the verse is My Generation by the Who with Queen's We Will Rock You as the chorus. If this was a group called Stealing the Past or Rock Thieves or something, and they dressed like Frank Zappa and made that track you'd think, 'This is brilliant, this is sardonic, it's satire!' Instead of which it's pathetic. At least Westlife were good singers. And Take That. Even Boyzone would have said, 'We're better than that.'"

The business was always a contrivance, he argues, but it's now so self-evident he's amazed it's still convincing. "Bruce Springsteen standing silently between numbers, fingering his guitar ... Is it really thoughtfulness, the idea that rock'n'roll should be meaningful, or just a pose he's come up with that he knows works? There's something odd about him pumping out those angry words in Badlands, then smiling happily at the end when people applaud. Is there really any feeling left after playing 500 stadiums? It's an act. After 30 years it has to be an act!"

But the Napier-Bell of the 21st century now seems above it all, one of the last grandees who could rack up a fortune watching the "argy-bargy" with amused detachment. Why should he worry? He lives in Thailand with the boyfriend he met on a beach in 1989,43-year-old interior designer Yotin Chaijanla, and the gentle flow of revenues from his Las Vegas musical, Raiding the Rock Vault, a management company and a 14 million-selling Spanish hit he wrote called Perdoname all fund an enviable life of first-class air travel, hotels and restaurants.

Are the huge, colourful characters like Simon Napier-Bell still out there today or was he just a product of his time? "There's always been big personalities and there were many a lot bigger and madder than me. Andrew Loog Oldham, who really created the image of rock by pushing the Stones to be so anti-social. Peter Grant, who pushed the promoters for the maximum money, 90 per cent of their takings, when he managed Led Zeppelin - but he was also violent and quite brutish so it's rather disgusting to think he's still revered: the big award at the annual Music Managers' Forum is called the Peter Grant award, which is like an Italian restaurant winning the mafia awards. And Malcolm McLaren, of course. I don't think he ever really achieved anything, which was probably what he wanted; he just wanted to cause trouble. Very middle class, actually. We used to go to the Westbury in Mayfair for afternoon tea, completely at odds with this guy who wanted to destroy the world."

Where will tomorrow's entertainment come from? "Well, not from the music business as it's too exposed, too understood, too known about. We're going to have far more artists all selling fewer records. That huge monster megastar thing can never come back."