I'm trying to recall the name of a book about a girl who figures out she has magical musical abilities attributing to fairies. When her and her band of rock-playing fairies perform, the audience seems to be under a spell. There is eventually a battle between good and evil. It must be a YA science-fiction book.
Sounds a lot like an old paperback fantasy novel in my collection. War for the Oaks, by Emma Bull (first published in 1987).
The main viewpoint character, Eddi McCandry, is a female guitarist in Minneapolis who has been trying to make a living as part of a local rock band that wanders from one gig to another (they don't have any big record deals to make them household words, or anything like that), and as the plot develops, she leaves her old band and forms a brand new one, led by herself, in which some of the other musicians look human, but turn out to actually be supernatural entities whom she never knew existed until just recently. In fact, her new band ends up being called: "Eddi and the Fey." ("Fey" being a word that basically means the same thing as "fairy" or "faerie," although of course their audiences are meant to assume the name is merely colorful, and not literally accurate!)
At the climax of the novel, there is, as you remembered, a big musical showdown between "Eddi and the Fey" (the good guys) and another magically-empowered band representing the bad guys. I believe victory was supposed to be determined by who had a bigger positive impact on the human audience. (It's been a heck of a long time since I read my copy, though.)
To illustrate my point that we're probably remembering the same story, here's an excerpt from the Wikipedia entry for this book:
The book tells the story of Eddi McCandry, a rock musician who finds herself unwillingly pulled into the supernatural faerie conflict between good and evil. War for the Oaks is a pioneering work in the subgenre of urban fantasy: although it involves supernatural characters, the setting (Minneapolis) is decidedly real-world.
Elfish's friends live hand-to-mouth in a bleak part of London, squatting, seeing local bands, getting high and feeling bitter over lost ambitions. Not so Elfish herself, who pursues her dream with a determination that verges on the demonic. She rarely eats, never washes and is devoted to Queen Mab - both the Shakespearian fairy and her own thrash metal band, formed with her attractive but dim-witted lover, Mo. But when Mo jilts her, Elfish is determined to stop him and get revenge.
The Martin Millar novels are described in the following way:
The novels he writes as Martin Millar dwell on urban decay and British sub-cultures, and the impact this has on a range of characters, both realistic and supernatural. There are elements of magical realism, and the feeling that the boundary between real life and the supernatural is not very thick.
If this does not sound like what you're looking for, I'd say his books are still worth a look. I would however add that, due to certain content of a pornographic nature, this book is probably not appropriate for the younger audience, despite the clarity and simplicity of the writing style.