Pete Waterman (worth nearly £50m) attacks greedy pop stars

The music svengali and Pop Idol judge Pete Waterman says greedy pop acts are "pricing themselves out of the market".

Waterman, who was responsible for launching a series of top acts including Kylie Minogue, Steps and Bananarama, said he was fed up with artists just talking about money and putting earnings above music.

The songwriter and former record company boss said many stars didn't realise how lucky they were to have been given such a golden opportunity with often little talent.

In an interview with Radio Times he said discovering Kylie Minogue was the worst thing that ever happened to his famed partnership with Mike Stock and Matt Aitken.

The partners, who formed Hit Factory, were behind Kylie's first hit, "I Should Be So Lucky", in 1988, when she was a star on the Australian soap Neighbours. But Waterman said it virtually destroyed their company. "In 1989 we banked £17m and I thought, 'Fantastic', until the accountant phoned to say we were £8.9m overdrawn.

"No one warned, 'You're paying the artist too much'. In retrospect Kylie was the worst thing that happened to us although she's fantastic and we're all best mates. We were a small company, sharing our revenue with the artists, which sounds applaudable, but when you become Kylie, running the empire is enormously expensive. This sounds silly but we didn't have time for a haircut so the hairdresser came here – for £1,000. Clothes and shoe shops visited us and we spent £15,000 a time on suits. The cost of not having to shop is enormous."

Waterman, one of the greatest success stories in pop music, made it in the business while unable to read. He did not overcome his illiteracy until 1986. He is now believed to be worth £45m, and can be an extravagant spender. He was a collector of Ferraris and once notoriously bought 18 of the luxury cars in one day.

But he is deeply critical of pop acts who were in the business simply for the money. He said in his interview there was no loyalty to record companies and that artists were simply trying to pin down the most lucrative deals they could.

He warned: "Artists are pricing themselves out of the market, like footballers. All they talk about is how much money they can make and I'm fed up with it.

"Musicians come off the street, uneducated like me, and the business gives them millions, although a bank wouldn't lend them 100 quid. As Mark Twain said, 'Feed a starving dog and it won't bite you'. That's the principal difference between an artist and a dog."

His comments come in the wake of reports that Robbie Williams is seeking a £40m deal to renew his contract with EMI. Mariah Carey signed an £80m deal but was paid off with £38m when her album, Glitter, turned out to be a flop.

Minogue was Waterman's most successful act, though he had never even heard of the hugely popular Neighbours programme in which she starred when he signed the 18-year-old. But he was prescient enough about the future of the "completely innocent little girl who used to sit in the studio with her mother, basket weaving", to form his own record label, PWL, on the strength of his discovery.