Nancy Drew's father, a well-known attorney, handles contract negotiations for a friend's son's band, Bent Fender. Roger Gold is the band's drummer. The band invites 18-year-old Nancy and her friends (Bess Marvin, George Fayne and Bess' boyfriend, Alan Wales) backstage for their Radio City Music Hall concert in New York and for a tour of the city's nightclubs.
At the music hall, Roger greets the group and introduces them to the rest of the band. Barton Novak, the lead guitarist, tells Nancy he wants to talk to her after the show. After awhile, Roger recognizes Alan as a guitarist in another band and compliments him.
Bent Fender goes onstage to warm up while Nancy and her friends wait in the band's lounge. Roger rushes back into the lounge looking for Barton. Nancy, her friends and the band go to Barton's dressing room. They notice Barton's boots and guitar and think something happened. Linda Ferrare, the band's bass player and backup singer, tells Nancy and her friends that Barton disappeared twice before. Roger worries that this time is different. He also tells Nancy that Barton thinks their agents and producers are cheating the band.
The band invites Alan to play in Barton's place until he is found, and Alan accepts. The musicians don't want to call the police, so Nancy and her friends start their investigation by exploring the building. At the stage door entrance, Nancy talks to the guards. When they mention that they let in two men with big boxes to unload equipment, the roadies playing cards with them get upset. The two men weren't band members, and the roadies already had taken care of the equipment.
Nancy gets a description of the two men. Next, she finds a wallet on the floor that has a dragon on it. The tail of the dragon is in the shape of an "L." As she continues looking at it, someone hits her on the head. When she regains consciousness, the concert is almost over, and the wallet is gone.
After the concert, Nancy tells her friends what happened. The morning newspaper headlines Barton's disappearance. Nancy asks to go with her father to his appointment with the band's agent, Ann Nordquist. Ann tells Nancy that she doesn't think Barton is getting cheated. She gives Nancy names of people to talk to at the record company. Ann confirms Barton's previous disappearances. She doesn't think any of the people she listed for Nancy match the guards' descriptions.
Nancy easily gets through security at the record company and visits the people on her list, including Harold Marshall. Harold's secretary, Vivian, doesn't want to let Nancy in, but Nancy walks past her into the office. Harold tells Nancy that Alan came to see him about getting a record contract, and Harold wasn't interested. Harold also tells her that Barton's disappearance is probably a publicity stunt. He hasn't noticed anyone matching the guards' descriptions.
At lunch, Bess and Alan unexpectedly join Nancy and George. Vivian called, and the company wants to produce an album with Alan after all. Alan says Barton (wearing a favorite bandana) was in Harold's office when Alan went back to meet with Harold. Barton appreciated Alan covering for him and wants him to continue for a little while. Alan and Bess are going to the recording studios after lunch.
Back at the hotel, Nancy gets a message that one of the music hall guards has additional information. Nancy's boyfriend, Ned Nickerson, calls. He saw the story in the paper about Barton. When Nancy tells him about the case and being hit on the head, Ned decides to come to New York. After they hang up, Nancy calls the guard. The guard discovered Barton's bandana the night before, after Nancy and her friends left, and a fire escape latch is broken.
Nancy and George go the recording company offices to talk to Alan. The receptionist directs the girls off-site to the recording studios. When the girls get to the studios, they find that Bess and Alan have just left. As Nancy and George are leaving, they see Vivian putting a package in one of the rooms. After Vivian leaves, Nancy and George go to the package. It's the group's original music recordings. The sign-out sheet has Barton's name on it, but not Vivian's.
Nancy thinks that Barton has been kidnapped and calls Roger. She updates him on the case and asks who has access to their original recordings. Nancy thinks someone is making and selling illegal copies of the band's albums. Roger tells her technicians, musicians and record company executives usually have access to the room and the recordings.
Stopping at the library, Nancy and George research the music black market and international copyright laws. After they meet Ned at his hotel, they go to a club. When Bess and Alan arrive, Nancy questions Alan's story about seeing Barton. Alan insists Barton was in Harold's office. Bess supports Alan and gets mad at Nancy.
As Nancy and Ned leave the club, they run into a college friend of Ned's, Dave Peck. Dave gives Nancy a strange look. Later, Ned tells Nancy that Dave was expelled from school and had worked at a record store. Watching Dave get into a limousine, Nancy realizes he matches one of the descriptions the music hall guards gave her. Nancy gets a glimpse of the car's license plate and notices a dragon on the plate.
The next morning, Ned calls the record store and the college. The record store fired Dave for selling illegal album copies and pocketing the profit. Ned gets Dave's mother's phone number from a friend. Nancy phones Dave's mother and finds out Dave calls home weekly, but his mother doesn't know his home address or where he works, but she thinks Dave works for someone named Li.
That night, Nancy, Ned and George go to a Bent Fender concert to look for Dave. Inside the club, Nancy sees Alan, Bess, Vivian and others she knows, but not Dave. After a music video shows Dave and Vivian as a couple, Alan and the band go onstage, but Alan's amplifier short circuits, and the club lights go out.
When the club lights come back, Nancy finds Alan, but Bess is missing. Eventually, Alan tells everyone the whole story. Bess was kidnapped during the blackout. Alan hadn't really seen Barton in Marshall's office. Before Alan came to the concert that night, he overheard Vivian on the phone in Marshall's office. Vivian was behind the publicity angle for Barton's disappearance and the record contract offer to Alan. A shipment leaving the country that night includes a body. Nancy thinks the shipment is illegal album copies for sale overseas. The group is afraid that the body is Barton, and that Bess might make two. Alan shows Nancy and the group a note from Bess' kidnappers warning him to keep quiet. Concerned for their friends, Nancy and the others stay on the case.
The group deduces that the pick-up place for the shipment is a downtown restaurant. Before they leave the club, Nancy calls the police for backup. At the restaurant, a dragon symbol with an "L" shaped tail is above the entrance. Nancy and Alan get in the restaurant to look around while the others wait outside.
Nancy and Alan don't find anything inside, but a window behind a wall tapestry prompts them to look outside for a back entrance. As they rejoin the group, they see Dave and another man loading a truck. A third man accompanies them, and a fourth is standing watch. Nancy and the group overpower the four men and lock them in the truck. Alan waits outside for the police while the others go upstairs.
They find recording equipment in the loft. Roger finds Bess and Barton tied up in a room off the loft; he and the other musicians untie them. As everyone reunites, James Li, who is Dave's boss, and his men unlock the truck and intercept the police and handcuff them. Alan escapes, and Li corners the rest.
Vivian and Dave arrive. James goes ahead to the docks and tells Dave to set fire to the building once he finishes loading the truck. Nancy tries to talk Vivian out of committing murder. As they are talking, Alan disarms Vivian and unties his friends. They subdue Dave, Vivian and their accomplices.
The police arrive. Dave tells them the dock James is on, so James and his accomplices are caught. The Chinatown Neighborhood Association hosts a lunch the next day for Nancy and her friends. Bess is still bothered by Alan's lies, but George encourages her cousin to remember that he also saved their lives. Barton and Roger offer to help Alan in the music industry.