ZDNet took a look last week at NPD Group's annual Digital Music Study, which shows that in 2008, the number of Internet users buying digital music online rose by 8 million people, up to 36 million.  Online digital music sales now make up a whopping 33% of all tracks sold (which is evident by a corresponding decline in CD sales).

Unfortunately, the slowing economy means that there are fewer total people buying music, but that doesn't necessarily mean that there are fewer people listening.  Services like Pandora, Rhapsody, and various apps on social networking sites are seeing increases in listeners, according to ZDNet.

Music distributors used to focus on two questions: who is listening and what are they listening to?  But now, there's a third component: where are they listening?  On iPods? As background music as they surf the web on laptops? On a state-of-the-art MP3 stereo system? On satellite radio in their cars?  Consumers have different demands depending on the devices they're using, so this marketplace of business models for distribution is great for consumers and device-makers alike.

As technology evolves, we'll probably see even more experimentation in music distribution models.  Some of them will meet the demands of consumers, and they'll flourish, as iTunes and Pandora have.  Some of them won't, and they'll fade into obscurity.  That's as it should be in the digital society: companies are free to offer a range of products and services in a range of ways--and consumers pick the winners.

Following up on Jon's post a couple weeks back about the potential dangers of P2P file-sharing software, A+L's Mark McKinnon has a piece running today at the Daily Beast about the true cost of downloading "free" content from P2P networks:

Unbeknownst to users, many P2P applications can make all of the files on a user's machine or network available, not just the songs and movies that users intend to share. They're also sharing tax returns, online shopping receipts, bank statements, passwords, credit information, and more available to the identity thieves and cybercriminals, who eagerly prowl P2P looking for these lucrative nuggets. That's a lot to give away in exchange for music than can just as easily be acquired at a low cost on sites like iTunes, Amazon, Rhapsody, and other online music stores. The copyrighted material may seem to be "free," but the price of getting it illegally can be quite expensive.

Of course that's bad on an individual scale, but it's nothing compared to what could be in store for the owners of computers infected with the Conficker virus. McKinnon explains:

Once activated, the virus will link together a massive network of hijacked computers that could be used for any number of nefarious activities. One of the more startling possibilities is that it will enable the virus' creators to search and access the information in every file on every one of the infected computers. Think of it as an underground and malicious Google that would mine the world's computers for financial and personal data, and then sell it to the highest bidder.

That wake up call is certainly a grim silver lining.

Yesterday the Senate Commerce Committee held a hearing on ways to improve cyber security, clearly an important issue in 2009.  Just how important is it?  Consider these two things:

1.) The New York Times' Bits Blog reported yesterday that on April 1, the Conficker virus--which resides quietly on as many as 12 million computers worldwide--is set to activate on April 1. And the scariest part? No one is quite sure what it will do:

Speculation about Conficker's purpose ranges from the benign -- an April Fool's Day prank -- to far darker notions. [...] Conficker's authors could be planning to create a scheme like Freenet, the peer-to-peer system that was intended to make Internet censorship of documents impossible. Or perhaps the Conficker botnet's masters have something more Machiavellian in mind. One researcher, University of California at San Diego computer scientist Stefan Savage, has suggested the idea of a "Dark Google." What if Conficker is intended to give the computer underworld the ability to search for data on all the infected computers around the globe and then sell the answers?

2.) The FBI recently estimated that cyber-crime has now replaced drug trafficking as the most lucrative global crime. The agency estimates that cyber crime is now pulling in over $1 trillion a year in profits.

At yesterday's hearing, Edward Amoroso, senior vice president and chief security officer at A+L member-company AT&T described how cyber attacks can "devastate infrastructure," and offered the committee a few ideas on how to combat the problem:

We believe that the public and private sectors can and should create structures for timely and secure sharing of cyber-security threat and response information between government and industry, and between and among critical infrastructures in a trusted, collaborative environment. [...] Perhaps most importantly, the government should collaborate with industry on research and development efforts in pursuit of critical cyber-security capabilities, and in furtherance of interoperable identity management processes between government and the private sector.

It should come as no surprise that these solutions rely on collaboration both within the industry and between industry and government.  We're all a part of the same global network, and solutions to the problems we face from cyber crime--whether it's malware, piracy, SPAM, phishing, or any other threat--will require collaboration, coordination, and implementation on a truly global scale.

In the competition between the broadcast networks, it's difficult for one site to distinguish itself from the others. The networks share their main features in common: each program gets its own page, with some video (with a good chunk of it available in higher quality), a forum for the fans to discuss the show, and basic info about the series.

How well does CBS.com cover some of those basics, and how do they differentiate themselves from the others?

First, there's the important matter of how much content is available. CBS of course has pages for all its currently running shows, and several specials that have appeared on the network, but they also have 14 classics. All series have at least some videos, and many shows, including virtually all the primetime ones, are available in either "HQ" or "HD" format.

For a handful of its currently running primetime series, only the two most recent full episodes are available. About a third of them have a significant number of videos (the reality shows even have several full seasons), along with a few daytime shows and Letterman, and all of the classics have full seasons available.

Unlike many other TV-based websites, CBS mostly shies away from providing trinkets for the fans such as themed wallpaper, buddy icons and games. (An exception is mobile content, which keeps viewers' minds on the show when they're not at a computer.) CBS's focus is on delivering the video and allowing the fans to socialize about what they're watching.

So while they provide a forum for each show, they set themselves apart by also providing an opportunity for fans to interact as they watch the show. In the Social Viewing Room, you can watch recent episodes that each come with a chat room of sorts, bringing the water cooler aspect to fans far and wide.

The viewing room has it all. You can choose your own viewing room and invite your friends via email, IM or even Facebook and MySpace. You can chat individually, or leave comments for the whole room. You can even use little "props" or simulate "laughing". And then, for some shows, there's a quiz question every couple minutes, testing your attention to detail and memory (and it keeps score).

CBS's reality shows offer the most chances for fan interaction: among a couple of extra features, rather than just watching and chatting, you can also watch and vote, generally just offering your opinion about various aspects of the show.

Tying the rest of the site together for users, CBS also features its own social network, the CBS Community, which allows viewers and their friends to keep track of their favorites, how they rated videos they've watched, and their forum posts.

And lastly, another way CBS encourages fan interaction is by linking each show's page to its entry on TV.com, which CBS runs. There you'll find more in-depth treatment of each show by its enthusiasts - including series on other networks.

Add it all up, and CBS has clearly endeavored to avoid clutter and draw an interactive audience. It's an intriguing plan, and in a time when viewers want content to be flexible around their increasingly networked lives, it might just be the future of TV.

Our transition to the digital age has brought consumers and content creators immeasurable benefits--that certainly isn't a question.  But as the way we consume media changes, some of the old business models for how content is distributed and paid for are running up against some problems.

Take traditional television, for example, which relies in large part on ad revenue.  As television has shifted to digital format, there's been an explosion of channels and content, which is good for consumers.  But even though there are more viewers than ever, there are fewer eyes on any one program at any given time.  That's a difficult spot for an ad-supported industry to be in.

Over at Media Post's Online Spin blog, Dave Morgan hits this problem squarely on the head:

Thus, the television industry has shifted from a world of scarce distribution to scarce attention, and most expect much of the economic value to follow. Value in the future will be less about securing distribution of programming and more about attracting and retaining audiences for programming, probably on a case-by-case basis.

Why are audiences fragmenting so much? Certainly, part of the problem is that with many more choices--actually, an explosion of programming choices--it is quite natural for viewers to spread themselves out among the many different types of channels and programs now available. Folks are no longer tied to only three broadcast networks for their television programming.

But that's not the only problem. I believe that viewer confusion and ignorance may be a very big driver of fragmentation as well. With so many choices on so many channels at so many different days and times of the day, it is practically impossible for viewers to know what's available to them at any one time.

But the problem is actually a bit bigger than just fragmentation of the audience--not just a problem of what people are watching. It's also a fragmentation of where people are watching their programming, with more and more people growing comfortable with seeking out traditional television programming online, whether it's on a PC or through a third-party device like AppleTV or Xbox Live.

And now cable providers are feeling the pinch from that online competition.  It's little wonder that we're seeing more and more traditional video providers--cable companies, satellite providers, and telecom companies--offering streaming online access to content from subscription channels for no additional charge to the regular subscription fee: "TV Everywhere," as Time Warner CEO Jeff Bewkes said earlier this week.

Will it work?

It could certainly create new potential ad revenue streams for networks and distributors, as the new wide world of digital content is available to a wider world of locations and devices than regular TV can reach.

But as with any new business model, it may be too soon to tell.  But we're certainly very excited to see the industry looking at these challenges and addressing them.  We're always happy when consumers are able to find the safe, legal content they want, when and where they want it.  It's heartening to see that the entertainment industry is trying new things in order to provide it.

Back when Napster was nearing the end of its life as a pirates' bazaar, a few developers introduced KaZaA, a similar P2P application that turned out to be ripe for similar abuses, and which for a time was at the top of the illicit file-sharing world. When legal troubles came their way, the developers sold the application.

Two of the developers, Niklas Zennström and Janus Friis, went on to create Skype, an application that allows users to make non-emergency phone calls over the internet (voice over internet protocol, or VoIP). Unlike other VoIP applications, Skype was running on P2P software and was entirely decentralized. Skype did not suffer the same legal troubles as KaZaA had, and indeed the developers were able to sell Skype to eBay for a cool $2.6 billion in 2006.

It wasn't long before they used the money and momentum created by the Skype sale to start work on their next project. With their background, it shouldn't be a surprise that Zennström and Friis carried on creating P2P software, and in 2007 Joost debuted as a desktop application that carried safe, legal, professionally-produced video to the masses.

P2P technology is a natural fit for video distribution. Videos - especially high-quality ones - are big files that soak up a lot of bandwidth. If you're trying to host all the video from central servers, then you're going to spend a fortune. P2P allowed Joost to only distribute video to a small number of users at a time: once new videos were downloaded by users, the users themselves would help to distribute the video files to any other users who came along.

Last October, Joost was able to discontinue the desktop application and switch to a Flash-based player working in your browser - a newer, more convenient Joost. The rest of the site may operate through their servers, but when you watch video, other users are helping to securely deliver that safe content to you, and you're paying it forward to other users.

Then, in December, Joost became even more convenient as it empowered users to enjoy their content on the go with a free Joost application for the Apple iPhone and iPod Touch.

And there's lots of content to enjoy. Joost enjoys partnerships with a variety of mainstream content providers, from Viacom to the NHL to Warner Bros., as well as indie music content. In May of last year, they boasted more than 7000 hours of videos (not all available in every country), and when they announced the new web-based Joost in October it was up to 8000 hours. Those 8000 hours were comprised of more than 46000 videos, more than half of which were TV shows and related content. The number of videos available in the US today is a little higher than that, and the number available globally is greater than 57000.

The videos are split into various genres and "channels" to make browsing easier, and they do make recommendations based on what you're watching at the moment and what's popular with other users, but the new Joost also emphasizes their social network, which at last count was not far from 10000 publicly visible users, as a way of discovering content you like.

Joost doesn't want you to have to start from scratch when finding people with whom to share your experience. On the one hand, they do have user-created groups for people with shared tastes, and you can easily check to see which of your email contacts is already on Joost. But there's another, more powerful way to make Joost an integral part of your daily social networking.
Their "Connect with Facebook" feature can connect your Joost and Facebook profiles in just two clicks. At your command, it imports your Facebook info and connects you with any friends of yours who use Joost, and at the same time allows you to send status updates based on your Joost activity to your Facebook Wall.

It's a notably more aggressive approach than simply allowing people to create profiles and expecting them to buddy up. And it may be a wise one: people often trust their friends and other peers to recommend content to them, so it may be that Joost will enjoy greater involvement from their watchers -and attract more of them - by tapping Facebook's massive user base of frequent visitors. And more users not only mean more ad revenue, but also more people helping to distribute video.

These simple ideas -- get people watching together, and let them share their bandwidth - seem to be working. So if you'd like a little help finding the best content, Joost might be just right.

NBC reports on an important security problem with p2p.  People don't often realize this, but p2p networks can make your private documents available online - e.g., your tax returns, social security number, bank account information and more.  NBC's investigation found "over 25,000 student loan applications and more than 600,000 credit reports easily accessible by anyone on these networks."  
 

Visit msnbc.com for Breaking News, World News, and News about the Economy

One family's tax return was accessed and their $2,000 tax refund - money they needed for their college fund - was stolen.  We're glad  that NBC helped the family get their refund back.   Unfortunately, there is no word on compensation for the artists whose songs were being stolen.  Their children also have college funds that suffer when their content is stolen.