Why are more stars jumping aboard now? To give but one example, why would Morgan Freeman take a chance on making movies to sell on the internet through his company ClickStar? "The traditional system is collapsing so fast that artists have to produce content themselves out of self-defense," says Roger McGuinn, the legendary Byrds frontman who was among the first to sell music directly via the Web. Just look at the mess in old media. The Writers Guild of America strike—a fight partly over expected future royalties from the internet—could shut down TV production for a year. TV networks already produce fewer scripted shows. Movie-theater revenue has been relatively flat for five years, forcing studios to tighten their budgets. In music, CD sales continue to fall, yet as recently as the spring of 2007, as EMI executives have told me, they still made up 90 percent of record companies' revenue. If inincome is dropping for labels with no replacement in sight, it's worse for artists, who get only about $1 per disc sold. Many artists now see an opportunity to make more money selling directly through iTunes or their own sites.

Meanwhile, the tech community has created an ecosystem piece by piece that can deliver high-end entertainment in user-friendly ways. Watching an episode of Robot Chicken on Joost can be easier and more convenient than catching the same show on the Cartoon Network. Quincy Smith, who runs CBS Interactive, recently said, "Faced with a choice between watching something on a beautiful plasma-screen television or on a PC, you're going to opt for the plasma-screen television." But that's true only if you're old enough to, well, watch CBS.

The stars haven't come en masse yet for a simple reason: the money. Julia Roberts makes $20 million per movie from the major studios. She'd have to be given some compelling reasons to build a website with a bunch of propeller-heads in Birkenstocks. When Will Ferrell jumps headlong into the Web, he's making a bet that the cash will come—someday. "This is happening in advance of the money," says Jonathan Miller, former C.E.O. of AOL and now a new-media investor. "It will be lucrative in the next phase, as ways to monetize [internet entertainment] mature and these businesses become real. It will be another turn of the wheel when real money starts to flow."

And flow it will, because money always follows the audience. There was a huge question about how Web-based entertainment would be marketed and publicized. But now there are viable candidates: the big social networks, MySpace and Facebook, as well as the smaller, more focused networks popping up through sites like Ning. Songs and videos are recommended and passed around. Some gain momentum. That is how Ferrell's short video "The Landlord" ended up being viewed 50 million times. It was never advertised or promoted in any traditional sense. Social networks are proving to content producers that there is a way to reach TV-network-size audiences on the Web.

One thing is certain: As internet ad networks like Google's get better at tracking video hits, dollars will shift from broadcast media to the more targeted media on the internet—a more efficient means of reaching potential customers. That revenue will attract additional stars to internet media, and they will draw a bigger audience, which will result in increased revenue. "It will quickly get to a point where if you don't do it, everybody else will be doing it," Miller says about developing entertainment for the Web. "If you're not there, where are you? Then you'll see the stars participate."

Record labels, major studios, and TV networks won't disappear, just as movies didn't disappear after the arrival of television. But they will be diminished, much as cable TV sapped the power and challenged the dominance of network TV a couple of decades ago. Certainly, traditional media companies will no longer be the content gatekeepers, which in some cases could be unfortunate. In this new media world, Donny and Marie could foist themselves on us again. There was a good reason their show was canceled. It was so bad that the clips still get hits on YouTube.