A few sour notes

THE LEADING LIGHTS of the U.S. music industry will gather in Staples Center tonight for the Grammy Awards, casting their annual hosannas to their most popular acts and the machinery that helped make them stars. Then on Thursday it will be back to the reality of slow sales, rampant piracy and fractured business models.

Not to put too fine a point on it, but there’s a yawning gap between the public’s appetite for music and the revenue generated by compact discs, the industry’s bread-and-butter product. Fans have access to more music in a greater variety of ways than ever before, and they’re consuming record amounts too -- they bought more than 1 billion singles and albums in 2005, an all-time high. But the growth came mainly from individual song downloads, and the money those tracks generated didn’t come close to offsetting the decline in CD sales.

An equally dramatic change has been seen among the chart-toppers that dominate the Grammy nominees. The five top sellers in 2005 -- by Grammy nominees Mariah Carey, 50 Cent, Kelly Clarkson, Green Day and Black Eyed Peas -- sold between 3 million and 5 million copies each. In the years leading up to the current slide, the No. 10 seller on the charts would have reached that level of sales.

Face it: The Grammys are celebrating a part of the music industry that’s in a funk. Major-label-backed, FM-radio-dominating artists may still top the charts, but they don’t move the tonnage they used to. And increasingly their ranks are being infiltrated by outsiders who attract fans through Internet-fueled word of mouth or hip TV-show soundtracks, not by spending millions to buy spins on FM radio. The success stories are often smaller and more organic, beyond the control of the suits on the coasts.

The shift in demand has been a boon to independent labels, which collectively captured more than a quarter of the market for CDs last year -- second only to Universal Music Group. But even the indies have to grapple with the digital revolution fueled by Apple’s iTunes and its ever-more-affordable iPods, which have freed music fans from having to buy CDs. Instead of spending $16 for the album, they can spend $1 or $2 on the song or two they really want.

On the bright side, the same revolution is helping fans broaden their tastes and discover more artists. It’s also bringing music to more places, such as cellphones and game consoles, and making it easier to buy on an impulse. And it’s slashing the cost of distribution and marketing. The major players in the industry, however, have to become more nimble to capitalize on these opportunities.

But tonight’s ceremony is about successes, not challenges. The hangover can wait until tomorrow.