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Grammy Awards and Piracy Update

The Grammy Awards are shaping up to be a showdown between four powerful women -- Beyonce, Taylor Swift, Lady Gaga, and Fergie from the Black Eyed Peas.

Microphone and Record
Microphone and Record

These women are remarkable artists, and smart brand managers -- see the Wall Street Journal's article on Lady Gaga's fast-changing always-intriguing brand. But these success stories are thriving despite of the ongoing decline of the traditional music business.

The Grammys, which air on CBS on Sunday, are becoming less profitable themselves, lower ratings pulled the cost of a 30-second spot last year below half a million dollars for the first time in a decade.

The Recording Academy has been trying to save the event -- and the value of its ads-- by pumping up the show with a collage of live performances from big-name artists. It worked last year, juicing ratings more than 10 percent. Will see this year's 3-D tribute to Michael Jackson can help maintain that momentum.

Higher ratings for the Grammys are also a good thing for artists-- the show provides a big forum to introduce up-and-coming artists to new fans and to remind existing fans to buy music.

The Golden Globes and Oscars can give a big boost to winners and nominees. With the Grammys it's less about awards and more about air-time. So this push to crunch in a lot of different artists is especially great for the newer ones.

So what is the state of the music industry? It continues to be decimated by piracy. A global association of music publishers, the International Federation of the Phonographic Industry released numbers that show how piracy is undermining both CD and digital music sales. CD sales dropped 16 percent to $11.6 billion in 2009.

Digital sales comprise about a quarter of music revenues, but digital sales growth declined from 25 percent in 2008 to just 12 percent last year. This comes as overall music sales are down 30 percent over the past five years. It seems safe to infer that the number of people accessing songs illegally over the past year has exploded. Who knows if the music industry will ever be able to stem the tide.

But big events like the Grammys are one way to remind consumers to buy concert tickets -- the most profitable part of the business -- and to get those remaining CD-buyers to pick up some discs.

Questions? Comments? MediaMoney@cnbc.com