There's two difficulty variants, I noticed (first year of doing this stuff for me, so this might be quite obvious to the intiated). The harder one was exactly that, and for people who have this stuff down. I think if you're not completely on point with it, it's a fail. The easier one is, obviously, easier, more forgiving, though still may take a few attempts to get the hang of. Don't stress about getting a top score, which is the only way to get the extra reward, I think. I managed an 8/9 on my best attempt and it wasn't any different to getting 2/9 in terms of the reward. It can be a little difficult to recover from failures - for me, that's because the sound distorts so wildly it's distracting, making it harder to get back on track, so maybe turn it off and just follow the visual if it's like that for you as well. Other things mentioned here about when to press for each colour are accurate. Good luck! (oh, and I'm afraid I don't remember the dialogue for the NPCs, but if you're looking out from the stage towards the crowd seating area, the easier NPC is the one on the left.)
Though, personally? I'd prefer an actual score for this. I'd rather sightread and cheese it in the traditional manner than follow random coloured square things.

EDIT: Just saw the post above mine says this too.