The singer - who won 'The X Factor' in 2005 - has been told by bosses at Syco Music he will not be getting another contract after his last album 'Obsession' failed to make the top ten of the UK album chart.
An insider told The Sun newspaper: "Shayne's a nice lad and works hard but people just don't seem to want to buy his music. He doesn't fit into the categories of stuff kids buy. He'd be better off in a boy band."
A Syco spokesman said: "After five very successful years and an international career which saw him sell over 3.2 million records, Shayne's contract has come to an end."
Although his first two LPs were well-received, 'Obsession' failed to live up to expectations and the only single released from it, 'Gotta Be Somebody' limped in at number 12 in the chart.