South By South West, Austin, Texas

New stars shine at world's biggest talent show

If the music industry is in a state of crisis, the news doesn't seem to have reached Austin, Texas. Its South By South West festival, which concluded yesterday, saw more than 1,700 bands playing on some 80 stages around town. The streets, some closed to cars for the week, were heaving with an assorted throng of labels, publishers, promoters, agents and press, beside some members of the public, who squeezed in where they could.

What started in 1987 as a showcase for unsigned Texan bands has expanded into perhaps the biggest music industry event in the world, operating on the sort of obese scale that characterises much of the state. Though still ostensibly a showcase event, this year's bill more closely resembled a traditional festival, with a string of heavy hitters from Steve Reich to Ice Cube, via REM, Lou Reed, Van Morrison, Motorhead, Moby, and Pharrell Williams's N.E.R.D. – none of whom, presumably, is short of a record deal.

As well as indicating how much the festival has changed, the presence of such major acts perhaps goes some way towards explaining just why the industry is in such a state in the first place. Every other conversation is about record label job cuts, a crisis acknowledged in some of the panel discussions: apparently the number of major label Artists and Repertoire scouts (A&Rs) has fallen from 450 to around 80 within the past decade. Yet some of the remainder still seem more interested in free booze, barbecues and getting nostalgic to the Lemonheads than in sniffing out the fresh talent that could go some way towards saving their jobs, if not completely turning the tide.

A number of A&Rs, less interested in an industry jolly, apparently no longer consider it worth coming to South By South West at all, which is a shame. Its unique concentration of so-called tastemakers means that buzz about new acts, perhaps available for overseas licensing if not a full deal, can spread around SXSW at staggering speed, and a lot of the time it's justified. Jesca Hoop, The Dodos and Liam Finn are only a representative handful of deserving new acts set to benefit from particular attention this year, while Lykke Li, Bon Iver and Laura Marling proved themselves worthy of their ubiquity on industry tip sheets.

Though already better known, New York newbies like MGMT and Santogold got a chance to justify the hype – dazzling future pop duo MGMT doing a rather better job than Santogold, whose live show isn't yet up to her recorded output.

The UK was well represented too, boasting 10 per cent of the total number of acts, from Dizzee Rascal to British Sea Power to the Kills, whose performance at the Domino Records night finally proved that the duo have substance as well as style. Adele and Duffy brought their battle for the new-Amy crown across the Atlantic, and, on our most-likely-to list, the Ting Tings, and Joe Lean and the Jing Jang Jong both impressed. Judging by industry response, neither is going to struggle getting a foothold in the US market.

While these were all evening showcases, one notable feature of SXSW is the trend towards bands playing additional unofficial shows, which some now regard as the heart of the event. Certainly, there couldn't be much greater contrast between the exercise in dull professionalism that was Van Morrison's official performance and the singular gentleman known as Strange Powers, encountered in the early hours of the morning at a fringe party in a forest. Wearing giant rabbit ears and singing to a ghetto blaster backing track, he was a hugely entertaining discovery, even if it's safe to predict that he'll never make an Astral Weeks.

In a move that reflects their increasing involvement in the business and even a possible business model for the future of the record industry in general, many of these unofficial showcases were sponsored by corporate brands from Levi's to Playboy. A concert ticket company was apparently responsible for putting on the sublime Felice Brothers at a downtown carpark. Meanwhile, preppy afrobeat revivalists Vampire Weekend just about lived up to the colossal hype when they played an unofficial show on Thursday afternoon, courtesy of the broadcaster NPR.

Yet if the resulting free chewing gum and energy drinks don't quite chime with the spirit of rock'n'roll, it's perhaps why at least one vote for gig of the week goes to an unofficial, and decidedly uncorporate, gathering that took place on the edge of town one afternoon. A string of wonderful bands including our very own Johnny Flynn and the Sussex Wit, the Heavy and Peggy Sue and the Pirates, performed outdoors on a makeshift stage partially constructed from old car parts.