If any industry has felt the brunt of the internet as a disruptive technology, it’s the music industry, which has been dealt a heavy blow by the onset of digital music distribution. On the April 28, the RIAA again confirmed this state of affairs when reporting that CD sales, the mainstay of the business for the last 15 years, were down a whopping 20.5% in 2007. Then on May 2, a Federal Court ordered AOL, Real Networks and Yahoo! to pay $100M to music artists as back payment for streaming their music online, proving that it’s not just the Big Four labels who have been affected by this disruptive shift.

Apple, a technology company, has become the most powerful player, with sales of 2 billion songs last year. The iPod/iTunes combo, the default of cool in our culture, has freaked out the Big Four and sent traditional music retailers like Wal-Mart and web 1.0 giants like Amazon scrambling into digital music distribution. So far their nascent incursions have not had a big impact, despite offering DRM-free music and savings of a few pennies.

While Apple and other legal download options have somewhat offset declining CD sales, the industry carries far too much overhead from 60 years of jacked up prices to make the digital transition smoothly. Music buyers used to pay up to $18 for an album and rarely was every song a keeper, now they pay 99 cents a drink.

Moreover, many consumers don’t pay for music at any price. The chart below, based on Compete’s data on more than 1,000 music sites, shows how the most popular options for listening to music online are free.

Despite lawsuits against illegal download sites, the fastest growing category in online music last year was P2P downloads, which shot up 140%. Nearly ten years after Napster raged through college networks, online music piracy continues to grow.

Meanwhile, the largest category in online music in March, 2008 was streaming, which racked up 28M unique visitors. The portals have driven the category’s dominance for many years by plugging into their massive traffic bases. MySpace joined the top ranks in 2005.

Then in 2007, a new breed of Web 2.0 sites with sleek, bright graphics and deep search and social feature integration, began to spread virally through social networks and heavily-linked music blogs. The sites combine streaming music with community-based sharing (vs. the anonymous exchange at P2P download sites) and in doing so can skirt thorny legal download issues.

These social streaming communities have risen rapidly in popularity. iMeem recently overtook Yahoo! Music as the most popular streaming site on the web.

*The Hypem1500 presents aggregate traffic to the more than 1500 music blogs tracked by the Hype Machine, a popular blog aggregator. The Hype Machine itself is ranked separately from its network at #16.

Collectively, the social streaming communities are flattening out the curve of online music. Compared to a year ago, the distribution of unique visitors at the Top 25 Streaming sites has a more gradual drop-off and longer tail.

As the music industry seeks to reassemble in the wake of digital distribution, it should recognize social streaming communities as the fastest growing opportunity in its evolution.

The song remains the same at the top of the Video rankings in March: YouTube continues to outpace the market, growing 7.8% while the video viewing sessions across the web grew only 2.3%.

Meanwhile Veoh narrowly maintained its spot in the Top 10, with phenomenal 23.8% monthly growth, edging out CBS Interactive by a very thin margin. The CBS Interactive division includes Sportsline.com, which scored a 154% gain as the prime spot for watching live streaming March Madness games.

Meanwhile Joost, which is backed by CBS, presented the games as a live streaming “experiment.” While Joost works via client, the March Madness offering did not bring much in the way of new visitors to the site to download the player.

Advertisers placed $545 million on TV for the 2008 NCAA Tournament, according to TNS, but just a tiny fraction of that followed online. With 8.5 million consumers watching next-day tournament highlights and interacting with NCAA Basketball content on the web, there was a huge opportunity to reach March Madness fans and perhaps to do it with more efficient media buys.

We used Compete’s BehaviorMatch, which can be customized for any demographic or behavioral segment, to call out the top video sites for March Madness fans.

While Sportsline came out on top in terms of Composition, predictably, some unexpected sports video sites like Runners World and The Golf Channel also scored high. Meanwhile, the largest sites like YouTube and MySpace aggregated the most eyeballs but had the worst Composition scores.

The Writers’ Strike may have put a damper on online episodes of America’s favorite TV shows, but it certainly didn’t hold back the country from checking out video coverage of the primary election during the Super Duper Tuesday month of February.

While traffic to online TV episodes and related video was essentially flat at the major portals in February due to a lack of fresh TV content and news, unique viewers at news and politics sites like CNN and MSNBC took a sharp increase from the historic Super Tuesday. On balance, the Top 10 competitors had 5.3% average growth.

The exception was AOL, which just started streaming episodes from all 4 broadcast networks on February 14th. Unique video viewers at AOL were up 19.7% versus the prior month.

Video viewers at Time Warner’s CNN grew 16% while MSNBC enjoyed a 22% increase as visitors tuned in to catch the latest on the hotly contested presidential primaries. (MSNBC is a 50/50 joint venture between NBC and MSN, with traffic attributed accordingly.)

Meanwhile some online video startups were nipping at the heels of the Top 10. There’s been phenomenal growth of video on the web over the past year. Here is just a sampling of the Fastest Movers, ranked by percentage growth in February of this year vs. 2007.*

• GodTube.com tops the list, with supernatural growth since launch in Spring of 2007.
• VBS.tv, Jack9.com, Current.com and Rocketboom.com are sources of originally produced content. These so-called “broadband studios” are producing innovative and, in some cases, exclusive content that has captured loyal followings.
• ExpertVillage.com, VideoJug.com and Instructables.com are geared around instructional videos. They are quickly creating a treasure trove of content and communities around the frequently occurring “how-to ________” search query.
• Veoh is the only site to make it into both the Fastest Growing Sites and Top Video Competitors.

*Note that sites launched after February, 2007 (for example, funnyordie.com and 5min.com) were not considered in this analysis.

May I have the envelope please… the award for this past week’s fastest moving website has got to be none other than the official domain of the Academy Awards. On Oscar Sunday, February 24, Oscar.com shot up 601% to 214,410 unique viewers vs. the day before.

As we wrote about last week, thousands were searching forOscar gold earlier this month at Oscar.com, the Wikipedia entries for the Academy Awards, and IMDb’s Road to the Oscars ‘08.

Oscar.com delivered this year’s bold performance on somewhat dodgy staging. With the writer’s strike holding back critical advertising and promotion of the awards show until the last minute, television audiences were down 20% versus last year. Yet Oscar.com was down only 6.4%.

Moreover, long term trends between Oscar.com visitors and TV audiences show low correlation. In 2004, for instance, when “Lord of the Rings” won best picture, the Oscars had a 5-year TV audience high while Oscar.com had a record low. Yet in 2007, when TV audiences spiked to see “The Departed” win best picture, visitors also flocked to Oscar.com.

This low correlation implies an online opportunity, yet the Academy is still missing cues online, with no live streaming and video from inside the Awards show restricted to press clips.

Like the never-ending montages, this year’s Oscars channel on YouTube rehashes moments from the vault. Unauthorized footage appearing on YouTube was quickly taken down at the Academy’s request, just like last year when clips of Jack Black and Will Ferrell’s duet racked up huge online viewership, only to be dealt the same fate.

It takes some seriously celebrity-obsessed searching to find those heartfelt acceptance speeches from 2008 online… Over at Oscar.com, there is just a “Thank You Cam” of the winners’ backstage reaction.

February has been a big month for online video. Google announced plans to incorporate video ads into search results. YouTube launched video ads in a big way. And Yahoo! Video re-launched with wider screen and enhanced social networking features.

Overall, the online video market grew 3% for the month. Compete tracks US-based traffic to 50+ online video properties.

YouTube continued to lead the pack, with a market share hovering around 50% since August.

Meanwhile, ManiaTV, which features indie music and news on Hollywood scene, caught attention with a 40% surge in visits on a 15% lift in unique visitors. Shows from B-list celebrities like Tom Green and Dave Navarro kept viewers coming back..

That’s good news for ManiaTV, especially since the 2nd string/niche video aggregators (think Heavy and Break) are tightening around 3.5 – 4M unique visitors.

Lastly, the new Yahoo! Video brings videos across the Yahoo! network and enables users to build out video-based profiles and join a community. On the February 15th launch, the site featured an exclusive: a trailer for the new Indiana Jones and the Kingdom of the Crystal Skull.

With John Donahue taking the CEO reigns today, I decided to take a look at eBay’s performance in the past few years. Under Meg Whitman, the company’s growth since 2001 has been remarkably steady, both in terms of traffic and revenue growth.

The chart below shows US Quarterly Unique Visitors and US Quarterly Revenue, including data from revenue-producing subsidiaries PayPal (acquired July 2002), Skype (October 2005) and StubHub (February 2007).

Lest anyone doubt that traffic is the life-blood of eBay (like most consumer internet companies) note that the correlation between Unique Visitors and revenue is an astounding 94%.

Performance has been remarkably steady in terms of traffic and revenue. However, in the past couple of years, traffic growth has been a bit choppy while revenue has accelerated steeply.

Here is eBay’s US Revenue per Unique Visitor since Q2 2001. The “Competers” highlight the gains from previously mentioned acquisitions.

Revenue per Unique Visitor is a key meter of sales efficacy and eBay’s current R/UV is at a record high of $12.65, up from $7.92 seven years ago. Most of that gain in sales efficiency has come in the past couple of years from initiatives like the well-received Fixed Price option and raised fees for sellers.

If eBay can successfully execute on the vision that CEO Donahue laid out today, which will “make eBay an easier and safer place to shop,” Unique Visitor growth will return to a steady trajectory and revenue should continue to accelerate.