Reproduced from Australian 9 October, 1999

But the thing is, he can't. There's no melody for him to latch on to, no hook. All he hears is a pulse, a remorseless "boom boom boom". His ears have failed him; he has no idea what the music is or what it is supposed to connote. For the first time in his life, he feels adrift, "like it was time for me to pack it in. 'Cause I wasn't enjoying it anymore."

In pop-culture terms, this is akin to Captain America burning the US flag. To understand, you also have to realise what pop music had meant to Waterman since his early adolescence. It was his mistress, his temple, his enabler. It was all he had.

It had also made him extraordinarily successful. As one-third of Stock Aitken Waterman, the biggest hit factory of the 1980s, he'd been responsible for more than 100 UK top 40 hits - including 13 No1s - and had launched the careers of a string of glamorous nobodies, from Mel & Kim and Bananarama to Rick Astley and Jason Donovan. And, of course, Kylie Minogue - for years the jewel in the SAW crown.

Its first hit was in 1984, with Divine's You Think You're a Man (which reached No16); later that year came its first No1, Dead or Alive's You Spin Me Round. Up-beat, maddeningly repetitive, it set the tone for SAW's subsequent sound - a mixture of light club rhythms, major key synth riffs and insistent hooks.

In the facile, acquisitive 80s, SAW was the entrepreneurial ideal made flesh: the ultimate self-made men. Little wonder, then, that the trio came to be regarded as Thatcher's creatures. The Guardian once called them "the popular front of the Thatcherite revolution".

If the firm's musical formula was simplistic, its business equation was positively moronic: "One boss. Two geniuses." It worked: the hits kept coming. But, in 1993, the partnership broke up. "Like all friendships, it had a finite lifespan" is all Waterman will say today. "Plus, money changes everything, of course."

The truth was a little more complex. After years of disputes regarding royalties, Mike Stock and Matt Aitken launched an action in the British High Court, claiming they'd been substantially underpaid for their contribution to acts such as Donovan and Minogue. Waterman, in typically aggressive style, bounced back with a writ of his own, claiming that SAW - his company - had failed to account for more than pound stg. 1million ($250 million) in royalties from records spanning eight years; that he effectively owed himself money. The litigation piled up; the once-firm friends stopped speaking.

Undaunted, he founded a new company, Pete Waterman Ltd, and began planning to rebuild his empire. From the sidelines, he watched as his former partners topped the UK charts with their latest signing: Robson & Jerome, two lantern-jawed actors, beloved of mums and pensioners. The music was terrible - ghastly cover versions of standards such as Unchained Melody and Danny Boy and artistically, at least, Waterman felt vindicated. But his own hits had dried up. "There were an awful lot of people out there waiting to stick the knife in," he admits, "and they thought it was Christmas."

Some would claim that he'd brought it upon himself. Waterman had always been the public face of SAW, a flash geezer with a big, boastful mouth. At the height of his success, he was reported to have owned no fewer than 18 classic cars, mostly Jaguars and Ferraris, which he kept housed at his lavish mansion in Cheshire. He even founded his own railway company during the 1990 privatisation of British Rail, a venture that is believed to have swallowed much of his pound stg. 60 million fortune. All of which led him to that disco in Manchester, that dark night of the pop soul.

At 52, Waterman is back with a vengeance, courtesy of his latest vehicle, Stepz: three girls, two boys, pushing a vaguely country-and-western-inflected style of disco-pop. Last year, a friend showed him the still-unsigned quintet, seeking his advice. Their gimmick, supposedly, was "line dancing".

Waterman took one look and saw potential. He assumed control of the group and the result - an anthemic remake of the Bee Gees' Tragedy - became the single biggest record of his career, selling more than 10 million copies. On a recent tour, they sold out 33 arenas across Britain. "At this rate," he says, "I would have to be a bloody idiot not to have the biggest act in Britain by Christmas. And I'm not that stupid."

It's further proof of what he calls his "Woolworths ears", his uncanny knack for sensing what will appeal to the market. Yet, perversely, he denies any suggestion of calculation: "I don't see myself as a svengali," he says. "I'm just a song man. I like good songs. Ever since I was a kid, I've just had a knack for spotting a good tune. I got good ears is why. There's no secret formula. To me, it's just a matter of putting out great singles.

"After 30 years in the business, I know what the public wants, and that's the difference. I don't care what radio wants, or television - I'm not the slightest bit interested in all that. I make records for people to buy. And if they buy them, then radio has to come around. And I've approached every single project - even when they're successful - with the philosophy that I'm only as good as the next song. 'Cause I'm aware that you can fall quicker than you ever got up there." INSIDE the PWL offices in east London, there's enough in the way of gold and platinum discs along the walls to armour-plate a battleship; idly, while waiting to be shown inside, I count 127 of them. Alongside each disc is a cover shot of the relevant artist, from acknowledged stars (Astley, Mel & Kim, an impish-looking Donovan) to now-forgotten one-hit wonders (Sonia, Pepsi & Shirlie). The whole pantheon.

In person, Waterman is gregarious and surprisingly unguarded. "A great bullshitter", as he says, but also a plain talker. He was, he freely admits, completely illiterate until about 10 years ago. Illiteracy, as it happens, helped him develop his notoriously thick skin. "I think, because I couldn't read or write, I was sort of immune to all the criticism. If I'd read it, I might have stopped - particularly in the late 80s, when we got accused of everything. I mean, if somebody had knocked up the Queen Mother, we'd have copped the blame. Nowadays, though, it doesn't bother me.

"See, nobody ever patted me on the back, academically. I was never the golden boy. So [I] learned to do without praise. I always said to people, if you can do better, then do it."

In the late 80s, Waterman made a public challenge to reviewers: if they could come up with a British No1 - write and produce it - SAW would give them pound stg. 1 million. "Surprise, surprise, nobody took it."

SAW's stars were unknowns, plucked from the obscurity of ordinary life: Rick Astley was a studio assistant, on loan from a youth opportunities training program; Mel and Kim, two single mothers from Brixton. Based as it was on a modesty of talent, their popularity was strangely egalitarian. It didn't exclude their audience; on the contrary, it seemed to reinforce their own fantasies. "You could do this," they seemed to suggest. "This could be you, up here."

He concedes the point, though admits that, in the beginning, it was more a case of necessity being the mother of invention. "We'd invested over pound stg. 500,000 in equipment but nobody was offering us work. The phones weren't ringing; nobody was asking us to work with George Michael. So we had to make our own stars.

"Truth is, when we recorded I Should Be So Lucky, we had no idea how big Kylie was. We didn't watch television, none of us had kids. We knew she was in some Aussie soap opera but none of us realised that 10 million people a day were watching it on BBC1. I wish I could say it was marketing genius," he laughs, "but, really, it was just dumb luck."

Above his desk, amid an array of rifles and toy trains, is a framed quote from Mark Twain: "If you pick up a starving dog and make him prosperous, he will not bite you. This is the principal difference between a dog and a man."

Waterman nods sagely. "The truest line I've ever heard."

It seems especially noteworthy, given that some of his acts - Minogue, in particular - have since been critical of SAW's star-maker aesthetic; their hands-on approach, their insistence upon complete control.

Waterman, though, is unapologetic: "To me, it's like being a dad. Your kids always know more than you do. Eventually they have to go out on their own, distance themselves from their parents, make their own life. And after a while, after they've lived a little and made their own mistakes, they realise their old dad might have known something after all.

"If Kylie, Rick, all of them hadn't gone through that stage, I'd have been very surprised.

"But, really, I don't bear them any ill will. I've been in touch with Kylie lately, for a book she's writing, and it was great."

With career estimates of his sales totalling just more than 500 million, and Stepz shifting 17 million units, it's difficult not to see this as Waterman's renaissance. Yet far from being satisfied, he seems as driven as ever.

"I'm not interested in the money, per se. For one thing, I don't need it; I already got loads. For another, if I concentrate on my business - which is making the music - then the cash will follow of its own accord. And I know I can walk out of here tonight and, by the time I reach London Bridge, I'll have had four or five people come up to ask me when the new Stepz single is out. Or in other words, `Can I give you another four quid, you rich bastard?' And it's not like I'm putting a gun to their heads; they want it and I want to give it to them.

"And when people don't buy one of my records, that's a message to me that I got it wrong. If my new single only gets to 43 in the chart, then I've failed. Fine. Kick me in the bollocks and send me back to the drawing board, I'll come up with another one.".