This may be a little speculative, but I'm fascinated with the idea that label executives of the 50s and early 60s may have believed that guitar groups were not the way of the future. Especially when guitar groups are the biggest presence in rock music today.
What kind of music was expected to become popular during the early days of The Beatles?
There is now debate on whether he actually said this given he still signed a guitar based band, Brian Poole and the Tremeloes, instead of the Beatles.
Rowe was Decca's senior A&R man, its talent-spotter, and whether he was actually responsible for those famously non-prescient words, we'll never know. They were certainly quoted by Epstein, in his 1964 autobiography A Cellarful of Noise. But Rowe went to his grave in 1986 denying it.
Dick Rowe denies ever making those comments, furthermore he did not turn down the Beatles his AR man Mike Smith made the final decision between the two bands (he could only choose one) and went for the band who were more experienced, played better in their audition (they had their own amps, the Beatles did not and their sound in their audition suffered for it), were paid up members of the musicians union, were from London, meaning they could get to the studio easier for their own work and to be used as session musicians for other artists.
“I took the band that had been better in the studio—it was the only measure I had,” Smith says, though this isn’t quite true because he’d also seen the Beatles live, amid the hot excitement of the Cavern.3 But certain facts spoke for themselves. Poole and his group were so much more tidy than the Beatles—they’d played American air bases and a 1961 Butlin’s summer season and made two hallowed Saturday Club radio broadcasts; they had smart suits, Mayfair management, were paid-up members of the Musicians’ Union, and claimed to own £2,500 worth of musical equipment. When they went into Decca they were allowed to use their own amps. There were also geographical factors. Smith planned to put his signed group to regular use, not just in making their own records but contributing to other sessions as backing singers and musicians. This was unworkable with a band two hundred miles away in Liverpool, but Poole and the Tremilos lived around the corner from Smith, in Barking, on the eastern fringe of London. - Lewisohn, Mark. Tune In: The Beatles: All These Years
Furthermore Dick was the one who arranged their next audition with Decca and ex shadows Drummer Tony Meehan.
He suggested Brian speak to the new star name in Decca A&R, ex–Shadows drummer Tony Meehan, about producing the Beatles by private arrangement. For a fee approaching £100, Meehan would make their record and Decca would put it out. Rowe’s own quoted analysis had the Beatles down, at most, as something for 12- to 14-year-olds, so Meehan, all of 18, had what Rowe called “first-hand experience of what the teenagers want.” - Lewisohn, Mark. Tune In: The Beatles: All These Years
Epstein's claims are not only denied by Dick Rowe and Mike Smith, but they are contradicted by his signing of Brian Poole and the Tremeloes, who would release Twist and Shout before the Beatles did, as well as the signing of other Guitar based acts both before and shortly after the Beatles were signed such as the Rolling Stones, Them (Van Morrison), the Moody Blues, the Zombies, John Mayall's Bluesbreakers, the Brumbeats, the Tornados, Tom Jones, the Small Faces, the Marmalade, Billy Fury, Tommy Steele, Animals, Cat Stevens, Procol Harum, Kathy Kirby, Gilbert O Sullivan, the Circus and Eternal Triangle amongst others.
In conclusion, this is a case of he said/he said, but there are more people and evidence backing up Rowe's version of events than Brian's.
The Dick Rowe quote about guitar groups being on their way out comes from Beatles manager Brian Epstein's autobiography, A Cellarful Of Noise, meant to explain why Decca didn't end up signing the Beatles:
Not to mince words, Mr Epstein, we don’t like your boys’ sound. Groups of guitarists are on their way out.
This was always denied by Rowe, an executive at Decca Records, though of course by the time Rowe was denying it the Beatles were the biggest band in the world (otherwise why would anybody care about the autobiography of their manager?) and Rowe would of course deny it - nobody wanted to be the fool who denied the Beatles. On the other hand, Epstein was motivated to put words in Rowe’s mouth - the Beatles being so big and powerful, he might look like an insufficiently good salesman if he couldn’t get them signed. By the point in 1962 when the Beatles were in discussions with Decca, the Beatles were already a regional powerhouse with an international following thanks to their stays in Hamburg. They were a band who could command large fees thanks to the big crowds they got - and what’s more their manager was the manager of one of the largest and most influential record stores in the country (NEMS), and so someone they should want to keep happy. The London record companies really should have been interested in them at this point. Epstein had some explaining to do, if they weren’t...and the Beatles could definitely be mercenary about changing managers.
But it’s worth pointing out that the idea of the ‘guitar group’ in 1962 and the idea of the ‘guitar group’ after the Beatles are different things. In 1962, chances are that if you mentioned a ‘guitar group’, you were thinking of an instrumental guitar group. In contrast, the modern idea of the band a la the Beatles - a self-contained unit that did all the singing and all the instrument playing at the same time - had generally not percolated through the British music industry in this era; part of the struggle Brian Epstein had in getting the Beatles signed was that the Beatles strength was as a unit that did all of the above, rather than a ‘singer and backing band’ combo or as an instrumental guitar group. As a result, many of the record executives Epstein talked to while trying to shop the band saw the Beatles as a risk because they were something of a new thing (though the post-Buddy Holly’s death version of The Crickets were in the charts during this exact era doing ‘Please Don’t Ever Change’, so it wasn’t totally unprecedented - and the Beatles themselves later covered the song on the BBC). Lewisohn argues that the Beatles were lucky they ended up paired with George Martin, who he argues was the only producer in London who would have let the Beatles essentially be themselves - the other producers would have likely forced them into the ‘singer and backing band singing songs by professional songwriters’ mould.
If he said the quote, however, Rowe was almost certainly thinking of The Shadows, who had once been Cliff Richard’s backing band before striking out on their own making instrumental music like Kon-Tiki’ and ‘Apache’. The Shadows’ last #1 single was early in 1963, so when the Beatles ended up not signing to Decca, if he actually said something of that ilk, he was not that far off with that prediction. Certainly the era of the instrumental guitar group - The Shadows, or The Tornadoes with ‘Telstar’, or American examples like Dick Dale and the Del Tones - would have looked like a brief fad. It was a brief fad, because such groups struggled in the wake of the Beatles.
In a February 3rd 1962 edition of Disc tracked down by Mark Lewisohn, Dick Rowe actually discussed his feelings about the rock and roll market in a trade newspaper:
I think there are about five separate markets for discs. We talk about teenagers but even that section is divided into three.
those between twelve and fourteen are not romantically inclined, and like the thumping rock style best.
those between fourteen and eighteen are romantically minded and enjoy the ballad style of people like Presley and Cliff Richard.
those between eighteen and twenty-two go for artists like Sinatra, and people older than that have other tastes.
Bands like The Beatles or Brian Poole and the Tremeloes (who Decca did sign - see their 1963 ‘Keep On Dancing’) were likely what Rowe was thinking of with the ‘thumping rock style’, and Decca signing the Tremeloes and saying in print that there was a market for a ‘thumping rock style’ is certainly evidence that Dick Rowe was aware that there was a market for rock & roll.
According to Mark Lewisohn’s book, the junior A&R executive Mike Smith wished to sign both The Beatles and Brian Poole and the Tremeloes, but Rowe said he could only sign one of the two bands. Smith agonised over the decision but instead went with the Tremeloes, because they were ultimately a more professional group, with good quality equipment, and who were based in London and thus easier to organise (and Smith was friends with Poole in the first place, given the small London pop music industry).
However, Lewisohn also presents evidence that Rowe tried to work out a compromise with Epstein, that while they wouldn’t produce the Beatles, they would allow a very young Decca A&R man, Tony Meehan (who was eighteen and maybe knew what the kids wanted), to produce the Beatles by private arrangement for a large fee, and Decca would put it out. There is some controversy, according to Lewisohn, as to whether the Decca tapes present on the Anthology and bootleg (e.g., here) are these sessions made with Meehan, or are of the audition with Mike Smith; Lewisohn finds it more likely that there were no sessions with Meehan (not least because Meehan denies it) and the recordings are of the audition. It is perhaps likely that the Beatles/Epstein were offended by the Meehan offer, and refused it and began looking elsewhere.
If anything, Dick Rowe is portrayed as being an Americophile compared to his peers in the UK, and thus probably more receptive to rock and roll groups than most. There’s other music industry people of the era giving predictions of the next trends: Norrie Paramor, an EMI A&R man, had told Disc in 1961 that the next trend would be ‘waltz tunes’, according to Lewisohn, and a January 1962 edition of the NME included a list of six British ‘promising artists for 1962 stardom’: Pierce Rodgers, Lena Martell, Nick Villard, Anita Harris, Iain Gregory and Suzy Cope. I mean, none of whom were guitar groups along the lines of The Shadows (or the Beatles).
Did Rowe tell Epstein that guitar groups were on the way out? I mean, maybe, but to be honest, probably not. Chances are that he thought there was a place for groups like the Beatles, as he mentioned as such in print around the time. And, chances are, Rowe probably thought that groups like the Shadows were on their way out (because they were). But Epstein had his own motivations for saying the quote, and Decca didn’t quite fully reject the Beatles in quite the way that Epstein portrayed it in print.
References: Mark Lewisohn’s The Beatles All These Years: Tune In (Extended Special Edition, Part Two)