First, the downside: Donny and Marie Osmond could reconstitute their 1970s variety show, make new episodes, and deliver them online. And nobody could stop them.

But there's good news too, at least for some. Pundits and bratty little Web billionaires have long been predicting the demise of the entertainment-industrial complex. Finally, at the dawn of 2008, their predictions have proved correct. Basically, we're talking about a gargantuan realignment, like the fall of Communism, though possibly not as important.

It's one thing when unknown Wisconsin dudes lampoon Darth Vader with Chad Vader spoofs on YouTube. It's more profoundly symbolic when stars such as Radiohead, Madonna, Spike Lee, Trent Reznor, Morgan Freeman, Danny DeVito, and even Larry the Cable Guy join the uprising. Losing faith in the old guard, these celebs are using the internet to distribute their work directly to consumers and experimenting with business models that don't have anything to do with Universal Studios, Viacom, NBC, Warner Bros. Records, or any other media powerhouse. (Read about some of these outbreaks.) No one has made real money yet selling entertainment online, but there is a growing determination to figure it out.

The internet crowd is trying hard to help find a solution. Venture capital funding for startups that offer professionally produced content more than doubled in 2007 to nearly $60 million. New kinds of music and entertainment companies have swarmed onto the digital landscape, among them Blip, Kyte, Ooyala, and Asterpix—firms all apparently named by J.K. Rowling. Next New Networks, started by veterans of MTV and Nickelodeon, funds the production of video shorts and hosts them on its sites, but it also plans to distribute the shows to video services like Joost, social networks like MySpace, and cell-phone video channels. The company's networks include Bride-O-Rama, billed as "the first network to give you real bridal advice from the recently married." Over time, the company intends to assemble a mass-market audience from many small markets and collect a cut of ad revenue from wherever its shows are played. This is syndication, internet style.

Entrepreneurs are testing every business model imaginable. In March, video-search company Blinkx plans to launch Blinkx Broadband TV, which will act something like a cable company, offering multiple channels and delivering images of much higher quality than the typical grainy YouTube clip. Each channel will carry professionally produced niche programming, like yoga or Ukrainian travel. "If we can amass enough of an audience around the globe, we can advertise to it," says Blinkx C.E.O. Suranga Chandratillake. Meanwhile, comedians Jeff Foxworthy and Larry the Cable Guy are making comedy shorts for the just-launched MyBlueCollar.com, one part of the "or Die" network backed by Sequoia Capital, which plans to make money from advertising. (Look for Larry's video titled "Wide Stance." Or maybe don't.) Or consider Asterpix, a startup developing "hypervideos." If viewers click on a box of Pop-Tarts in a video, they'll get hauled off to a Pop-Tarts ad. Many ideas will get funded. Some will work, and some will make dotcom craters as big as Webvan.