It's my label, and I'll sign who I want to

Noel and Madonna are doing it. Frank Sinatra did it. But it isn't really a good idea for musicians to run record labels

Though he's always been indisputably in charge of his own band, even if the sous-chefs and dishwashers like to crack into the cooking-sherry every now and then, Noel Gallagher can now claim to be a real boss. His own record label, Sour Mash, releases its first album this week. Although opinions are mixed on the virtue of his first signings, his fellow Mancunians Proud Mary (some say they're unreconstructed pub rockers; others just don't like them), Gallagher, having reportedly stumped up his own money, has joined the long and dishonourable tradition of rich pop stars who think their ability to crack off a few decent tunes gives them a better than even chance of spotting a winner, despite decades of evidence to the contrary.

Surprisingly for a concept that chimes perfectly with rock music's self-importance and extreme financial rewards just waiting to be squandered, the vanity label pre-dates the album era that began in the late Sixties. Frank Sinatra was mollified by an offer from a moribund Warner Brothers, which, a decade previously, had set up Reprise for him, on which he put out records by chums such as Sammy Davis Jnr and Dean Martin alongside surefire money-losers such as Sing Along in Greek and The X-15 and Other Sounds of Missiles, Rockets, Jets. In fact his sale of the label back to the parent firm in 1963 for $1m cash and a one-third stake in the new combined operation would eventually turn out to be lucrative, when the longhairs he despised took over the charts, selling once-unimaginable quantities.

But Noel would surely admit to taking his cue from the Beatles' legendarily out-of-control Apple Corps, a pun so bad, it was surely McCartney's. Created in 1967 with the express intention of funding hopeful young artists in all fields, it couldn't cope with the sheer weight of contributions that soon arrived from all over the world. With no overall decision-making structure, save catching a passing Fab on a good day with a reasonable idea, and with costs soon spiralling, even the impressive label roster couldn't keep up. Of course, the fact that families of hippies and Hell's Angels were living in situ, and that the post-boys were stealing the lead off the roof and albums by the hundred, meant disaster beckoned. To his eternal credit, the down-to-earth George Harrison appeared in 1978's All You Need Is Cash, the story of the Prefab Four, The Rutles, as an interviewer confronting Eric Idle – playing a press officer clearly based on Apple's Derek Taylor – who denies the scale of the theft while an endless stream of lowlifes wander past with their newly liberated swag.

Despite the best intentions, Apple failed because it lacked a sound business structure and never managed to become truly independent of its corporate partners, who were reluctant to invest, despite taking a disproportionate share of the profits. Only a few years later, the ruthlessly efficient Led Zeppelin cleaned up with their own Swan Song label, especially in the United States, where their most successful signing, Bad Company, weren't far behind them in sales terms.

America, where a business mentality is forced into children at an early age, is more likely to produce artists capable of writing a business proposal. Madonna's Maverick set-up has long been seen as an important piece in her plan to take over the world, but even a cursory look at its artists reveals that they have little in common save their obvious commercial potential. It hardly took a genius to spot that Alanis Morissette, a less scary, more stadium-friendly PJ Harvey, would do well, though no one could have expected her to shift quite so many records. Drab though they may seem, The Deftones were clearly poised to separate millions of glum teenagers from their money, after years of building a following. And picking up The Prodigy, then the biggest act in the UK, and topping the US chart with them was so predictable, even a child could have seen it – though presumably not the A&R departments of the other majors. They were common-sense signings, not intuitive or risky moves.

The tendency to credit musicians with greater insight than the rest of us earned Prince a place on the Warner Brothers board, before he lost his name and quit for good. Today, Fred Durst, once a tattooist with a shaky hand, holds a similar position at Interscope records, where his talent-spotting skills are used to find young bands who often sound like his own Limp Bizkit.

Here in Britain, despite their influence on the last decade's music, Massive Attack have failed to match their own sales with their Melankolic label, while the Stereo MC's' long silence wasn't entirely unproductive. They managed to find and record a young hopeful called Finlay Quaye, but their backers wouldn't stump up for a proper deal. He sold his million records for another company.

Yet why do musicians bother at all? How can even the thrill of deal-making match the simple ego-boost of performance? It's no coincidence that the most interesting labels are run by serious fans who'd love to play music but know their talent is for listening.

Even Blur's Graham Coxon, once Gallagher's opponent in the forgotten Britpop wars, has his Transcopic label, currently offering the fine "Drinking for Britain" by Mower. As for Noel, rumours persist that Proud Mary's signing was contingent on their ditching their old drummer, the former Inspiral Carpet Craig Gill, who was allegedly once responsible for sacking Gallagher from his roadie post. Owning a company and sacking your old boss? Sod the music; that really is a dream come true.

'The Same Old Blues' by Proud Mary is out now on Sour Mash