People who illegally download music from the internet also spend more money on music than anyone else, according to a new study. The survey, published today, found that those who admit illegally downloading music spent an average of £77 a year on music–£33 more than those who claim that they never download music dishonestly.

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Grammy judges will be listening to the upcoming award nominees online, thanks to a partnership with Yangaroo, a Canadian media-distribution start-up.

The company’s technology encrypts music files with a watermark and lets record labels share them securely with radio stations and other destinations. The watermark allows Yangaroo to identify each person who has downloaded a track, so if a song is leaked, it can trace its origin.

Cliff Hunt, Yangaroo’s operating chief, used to work in music production and management but helped to start the company in 2004 after seeing a presentation about Biopassword. The biomarker system, now called AdmitOne Security, identifies a person’s unique typing rhythm. Mr. Hunt acquired the rights to use it for music and advertising.

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Microsoft (MSFT) is about to find out whether it can prevent further defections to the Macintosh among college students by charging less for Windows 7 than a typical textbook.

On Thursday, the company announced on Twitter that college students in the U.S. can upgrade their PCs to Windows 7 Home Premium edition for only $29.99, as long as they have a genuine copy of Windows XP or Vista already installed on their systems. That’s a quarter of the $119.99 Microsoft currently charges everyone else for an upgrade to the same version of Windows 7.

The details about the offer are on a special Web site Microsoft set up. There are a couple of catches: Customers have to have a dot-edu email address to prove they’re affiliated with a college, and their $29.99 buys them a version of Windows 7 that they can download Oct. 22 when the operating system becomes available, not a DVD.

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I have mentioned Google’s (GOOG) music-related activities in China a few times during the past two years; and just yesterday this topic seems to have heated up considerably. I think these developments are crucial and need further exploration.

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On Feb. 3, Sony Pictures Home Entertainment (SNE) is going to make an honest man of me. Finally I will be able to buy a legal DVD of one of my favorite movies, Carol Reed’s 1959 “Our Man in Havana.” But there’s still no rhyme or reason to what films are available in any digital form. If, for example, you happen to have a videotape player around, you can watch an old VHS version of “The African Queen.” But you can’t buy it on DVD or download it from any of the Hollywood-sanctioned online services.

The basic problem is that Hollywood is attempting to preserve an analog business model in a digital age.

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Last year, here on the Voices blog, I asked you all for your thoughts on how to finance and put out my next record. I got some swell advice, as well as some good wishes. Many agreed that the patronage system–asking fans to donate money–was a promising idea.

I really had no idea if I would make it, or end up embarrassed with just my mom donating at the “polished rock level.” By the way, the polished rock level (free early download) was $10. But you could donate all the way up to “weapons-grade plutonium” ($10,000), where you get to sing a duet with me. One businesswoman from the United Kingdom, named Jo Pottinger, flew in last month to sing and, honestly, did a bang-up job.

So, how have I spent my money so far? Well, I got production help from my pal Don Was (The Rolling Stones, Bob Dylan, Willie Nelson, Bonnie Raitt). He got me a great rate at the old A&M studios (where Carole King did “Tapestry,” Joni Mitchell did “Blue” and where so many of my favorites recorded). Normally, I would never be able to afford to record there.

He also hooked me up with some of my favorite old-time session players, like Jim Keltner, who played on all those Beatles solo records. We recorded old-school and played live with not much overdubbing–and that includes the vocals.

I wanted to have the energy and looseness of some of my favorite childhood records, before everything got so quantized and auto-tuned. And because of that, we did it really fast.

Oh, I have also booked a day where I will sing and play guitar on 10 songs to a click track. My idea is to release it with the audio files so that people (pro or amateur) can put the tracks on their garage band or pro-tools and mix, produce and deconstruct the songs as they see fit. Thinking of having a contest for the best production.

So, now that I have spent a little more than half my budget on recording, plus another $10,000 on various stuff (donation prizes, Webmaster fees, the PayPal percentage, iPhone apps), I have around $25,000 left to play with.

I still don’t want to license the record to any of the labels. But now I have to figure out how to do all the things they traditionally do (distribution, marketing, publicity) and take advantage of the opportunities with new media (which they have not been so great at).

There have been more than a few companies that have come to me with their new paradigms for how to make money in this digital age–mostly how they can make money. I am trying to look at all of them (some do sound sort of promising and intriguing).

Oh, and I still want to have hard copies available too–I have a friend who will make a mini graphic novel that would include two pages for every story (song).

So here I am, asking you smartypants AllThingsD.com people for ideas. You do seem to know more than most in the “industry.”

By the way, I reopened the Jillsnextrecord site recently, upon request, for those who told me they wanted to donate and have their names in the liner notes (or sung in a song). If any of you are interested–and I’m just saying–it will still be up until we go to the printers in a week or two.

Free streaming music turns people on to new music and encourages them to buy, says social-networking site Last.fm. In the music industry, this will not come as a huge revelation.

Last.fm, acquired by CBS last May, announced Wednesday that since the company launched its on-demand streaming service two months ago, CD and download sales through its partnership with Amazon.com have more than doubled.

So what does that mean?

Music discovery continues to be one of digital music’s greatest vulnerabilities. Nobody has come up with a sure or simple way to help people wade through the millions of tracks available on the Web.

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A few days ago I came across an op-ed submission that called for file sharing to be decriminalized. The editors here decided not to run it, but it intrigued me for a couple of reasons. First, the author, Karl Sigfrid, is a member of the Swedish Parliament from the Moderate Party–a pro-business party that’s akin to this country’s Libertarians (except in Sweden they’re more than just a fringe group). Second, although he covered much of the same ground earlier this year in a Swedish paper, Sigfrid’s new piece added another provocative contention: that unauthorized downloading isn’t actually theft.

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The Qtrax debacle is getting most of the attention this week, with Warner Music’s ridiculous CEO compensation close behind, but there is promising news in the music industry worth noting. Late last year, there was much fuss around Radiohead’s decision to eschew usual distribution schemes and release “In Rainbows” in a variety of formats, among them free downloads. It was no surprise that the marketing plan worked well and, more recently, helped the on-CD version of the new album top many sales charts. Radiohead is an extremely popular band; of course its experiment did well. But if there’s going to be a music industry anymore, it’s going to be because nonplatinum performers can make a living as musicians.

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There’s a great interview with Trent Reznor of Nine Inch Nails up at CNET, in which he talks about his experience with the Saul Williams album he recently released as a “pay what you want” download. … I say it’s a great interview, and it is–but Trent also says something that I think is pretty dumb: he says that he’s in favor of an Internet tax, in which everyone would pay their service provider $5 extra and that money would then be distributed to artists to compensate them for downloading.

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Yet another example of bricks-and-mortar scale not translating to online sales power and of grand plans deflating. Reuters reports that Wal-Mart, one of the largest sellers of DVDs, shut down its same-day-as-DVD video download service, citing Hewlett Packard’s decision to discontinue the service that powered it. The plug was pulled Dec. 21, far more quietly than the movie/TV download service began in February. No download details, but you have to think if the service was successful, Wal-Mart would have found a new vendor to keep it going.

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Chestnuts roasting on an open fire. Jack Frost ripping a CD.

Online piracy is creating a modern-day twist on “The Christmas Song.” Nat King Cole’s recording of the holiday standard is among the most popular downloads on file-sharing networks this year.

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