'I just don't see how studios survive,' said Steve Levine quizzically. 'The figures make no sense at all.'

That doesn't sound like the sort of thing a proud owner of a brand new, state of the art 48 track digital studio usually says. Particularly one who, like Levine, has a wife, family (well, a just-arrived baby girl) and two digital multi tracks to support.

'As a commercial venture,' he confessed. 'I don't see how it could pay for itself. I don't see how you could get the money back. After all, two digital multi tracks, a Fairlight, add all those things up, work out the total equipment costs over a year and then work out how much you can realistically charge an hour, and I don't see now you can possibly justify it.

'I'm surprised how any commercial studio can afford to buy this type of equipment. It just doesn't make economic sense. If you have a Studer and an SSL, you're into £200,000. Then you need 24 Dolbies. But of course, most studios are going 48 track. So you're already into £250,000. So let's say that the studio's equipment costs are £350,000, £400,000 a year. How much can you charge?

'And you're not going to fill it up every day of the year. On average, you'll fill the studio probably nine months of the year. Now, nine months at five days a week... work it out and you'll find it'll take at least three or four years to make your initial investment back.

'You could make more just leaving the money in the bank!

'Now in this situation, where I've got two digital multi tracks, I've got £200,000 tied up just in the multi tracks. I'm getting very close to a million pounds worth of equipment in here. It doesn't take very long to add up to that figure when nearly everything costs £100,000. So I'd be looking at five years or even longer to get my investment back. And with the rate of technology at the moment, five years is an incredibly long time.

'When I worked at CBS in the Seventies, I remember those Neve consoles they had, which were there for at least eight years. And they weren't even considering replacing them. In fact, they've still got a Neve upstairs there. And that was installed in 1971, I think.

'Then, the equipment turnover was minimal in the extreme. You had your desk and your machines and you were set then. The only big change was when CBS went from 16 track to 24 track. They were one of the last studios to make that change and then they got in MCI and everything, but even that I remember not being very expensive. To my knowledge, an MCI machine then was about £24,000 which, considering the rate of inflation and everything, wasn't expensive. I remember thinking how good value an MCI desk and an MCI machine was.

'Then you'd perhaps have to buy an AMS and a couple of compressors or something — even new microphones didn't come out that often. Now there's a new microphone out every week, virtually. There's so much more available now, and a studio, to stay in the front line, has to, if not buy the new products, at least review them with an eye to buying.

'For instance, I've just bought that new AKG bass drum microphone. That was an easy decision because it was only a hundred quid or something, but with some other mikes I have to sit down and seriously consider their usefulness, because the top-end microphones are at least a thousand pounds each for the really good ones... obviously you don't buy that many when you're talking about a couple of thousand for two mikes, but even so...

'Obviously I'm in a better position than most studios because I don't have to go through a lot of red tape — I remember at CBS we had lots of difficulty because of the paperwork involved. When Stuart Nevison brought down the first AMS we all wanted one immediately but it was a long, long time before we actually got one simply because of all the bureaucracy you had to go through in those days. Now if that had been me with my own studio and he'd showed me the device, I would have said immediately "here's a cheque!" and got it then and there. That is one of the advantages I have that enables me to stay ahead.

'But I do feel very, very sorry for the commercial studios: it's very difficult to make money. And I think that what is going to happen ultimately is that for pop work, the commercial studio is going to disappear.'

Tidings of doom for the studio business, indeed. But if anyone's fit to judge the business from a position of strength, it's Steve Levine. He is right on the leading edge of the high-tech movement with his studio, Do Not Erase Productions, boasting one of the very few permanently installed 48 track digital setups around. The two Sony 3324 multi tracks, along with the 1610 and DAE 1100 editor, linked via a digital patchbay that ex-Sony electronics wizard Rod Duggan (now with Total Systems) built specially for Levine, represent the very latest recording gear.

The ranks of keyboards, samplers, and sequencers, linked by Sycologic MIDI patching systems and ranked all along the wall of the studio, represent the very latest in music production gear. The selection includes, of course, a Fairlight Series III, a Synthaxe guitar (?) MIDI controller, a Kurzweil, a PPG Wave 2.3, right on down to a couple of Simmons drum kits and even a limited edition, MIDI-interfaceable, Mini-Moog.

The effects that sit behind the desk represent the latest and best in sound processing gear; an AMS delay with 25 (count them!) seconds of memory, a Sony DRE2000, a Quantec Room Simulator, a Yamaha Rev 1, and more AMS gear.

If anyone has bought a big slice of the future of the recording industry, it's Steve Levine. And by doing so he's also achieved a position from which he can look down on other people scrabbling around trying to find out which way the wind is blowing for the studio market.

It's not an encouraging sign for studio managers that the course he's plotted from his eyrie is one that consists of hoisting his sails and sailing as far away from the commercial area as possible.

Of course, he's achieved his privileged position partly because his chief resources aren't his equipment list, his highly trained engineers or his palatial and nicely decorated studio. No, his major resources are neatly attached to the side of his head. People pay for Levine to cast his expert ears over their artists' products and then to juggle with the aural and musical components thereof until they're both musically satisfying and commercially successful. And he's very good at doing just that.

However, now he has a perfect environment in which to work, plenty of expensive tools and up-to-the-minute gadgets with which to do his magic, and a lack of pressure in terms of time and overheads to worry about. This is bound to increase his value to any client. And that increase in value is one reason why he's built Do Not Erase.

Personal reasons as well as commercial sensibilities are part of the reasoning behind the place; as he spends a lot of time in the studio, it makes sense to have somewhere that is pleasant to work in, agrees with his own tastes in sound and in decor, and isn't too far from home, wife and child.

But as that's such an efficient and pleasing way to carry out the job of production, he reasons, that must be the way that most will go in the future. Why pay for a producer and a studio if you can have the pair as a package deal? Why pay to hire in lots of expensive and unfamiliar gear if the producer has his own, complete with expert programmers, on site?

'A lot of people have excellent gear at home now,' he argued. 'Derek Bramble, who I know, has two 16 tracks at his place, and I know he was looking at a DDA desk like mine because he likes it a lot. Paul Hardcastle does all his stuff at home. He's got a 24 track at home, a Mitsubishi I think, and a DDA desk as well. I mean, there's such a lot of people with great stuff at home, where they might have built a studio before and rented it out.

'I think what is going to happen is that the producer's role is to have this stuff, to take the responsibility away from the record company a little bit in terms of budgets. Companies are becoming a lot more budget-conscious nowadays; they know that records cost so much, and are likely to sell so many, and therefore they will make this much. There's a lot less of the "here's twenty million quid, do what you like" approach. Video budgets are still high, but the recording side is getting much more businesslike.

'There is even a clause in the contracts that some American companies have started doing which says "the overage is the sole responsibility of the producer". It's a horrible word, "overage", but what it means is that if I go a single cent over budget, I pay for it.

'Now there are very few cases with a professional producer where it's actually directly the producer's fault that a project runs over budget. It may be that an artist wants to do more takes when the producer was perfectly happy with the first one. It may be that the record company themselves want another mix. Well, you end up paying for that. And that's grossly unfair, but there's not much you can do about it, particularly with the very powerful companies in the States.

'So the only way you can be in control of that is to have your own studio and say "right, if that's the budget, I'll do it for that." If it takes an extra couple of days then I can swallow that because it's my own studio and that's OK.

'I've worked on enough albums now to know more or less how long a project will take, be it a solo artist, a group, or whatever. So I can work out the budget for that period of recording time, and the overrun will only be a matter of a couple of days at most, barring catastrophes like equipment breakdowns or artist illness or something. It puts me much more in control.

'And the other exciting thing I can see coming is with groups and artists buying recording gear, as they are doing so much now. TASCAM and Fostex have both openly admitted that they are working on budget DASH machines. So in a couple of years you will have a situation where a home recording set-up for a very small amount of money will be able to make demos, at home, that are equal to any top studio's products.

'No question about it, the demos will be as good as any professional studio could manage, of excellent quality. A lot of the time these days when bands play me demos, a sound that they're using has become an integral part of the track, and to get that effect I have to use the same gear exactly.

'For instance, I've been working with a band called Happy House recently, and their demo had a sound which was a Juno-60 played through a really naff chorus. I couldn't get exactly that sound with any of the synthesisers I've got, so I have to use their Juno-60 through a cheap chorus. Because that sound had been crafted into the song, it had become an integral part of the arrangement and was impossible to replace.

'So soon we will be able to take their demo into the studio and transfer it to our multi track and work on it from there. For example, what if a band sets up a parameter on an SPX-90, say, which then becomes an essential part of the song? They get signed on the strength of that demo, and the record company want something similar, but better quality, from the producer. I'd prefer it if bands did simpler demos, but if you play something basic to your average, thick A&R man, they'll throw you out. Even a demo needs to go "Bang! Crash! Zoom! Big Production!" just to convince him that a band's got anything to offer.

'So the logical next step is to transfer their demo to your multi track, strip it down and build it up again, often using some parts from the original demo. Sometimes you get such a good feel on a demo that you have to really try hard to recapture it on a record. If a group says to me "we think the bass, drums and guitar on this are brilliant but we realise we haven't recorded the vocals properly and it needs some more building up" then I will be able to transfer those parts and get on with the rest of it.

'Often when you write a song, the first thing you put down is the best, it has that spontaneity, that original spark of an idea, which can so easily get lost later on when it's re-recorded. Having that combination of artists' spontaneity with a producer's finesse would be the ultimate for me.'

But where does that leave the studios? Levine looks a little less than enthusiastically at their future prospects.

'Errr... I think there will still be quite a few doing orchestral work, film scores, that sort of thing, where large areas are needed just to physically contain the musicians.

'But I wouldn't open a studio right at the moment myself. I really wouldn't.'

Only time will tell. But hang on a minute — didn't Culture Club record that? And who was the producer again? Oh yes, Steve Levine. Maybe he knows already.