There is a reason people still buy CDs more than they do digital albums. Actually there are several, but viruses that come along with music via peer-to-peer sites (P2P) and a concern over digital rights management (DRM) aren’t the only culprits.

Digital music files just don’t provide the same amount of content that a CD package does. That includes liner notes, extended album art and lyrics. Buy a digital album today and all you get are a list of tracks and (maybe) a thumbnail image of the album cover that you can’t even read.

It’s one of the reasons music fans still turn to P2P networks for their music. In addition to providing music free of charge and free of DRM, P2P sites in many cases also include digital copies of such extras typically found in the CD. According to label sources and pirate network tracking firms, fans downloading full albums from BitTorrent sites almost universally choose files that include scans of the CD booklet over those that don’t

iTunes is facing new competition from Amazon and a variety of social networking sites. While it has made great advancements with the iPod, iTunes’ innovation has been slow. The service looks and operates much like it always has. The only new features are in video.

iTunes is the only music service that has a built-in video download feature. The others offer only streaming video. It’s also one of the few services that feature a tightly integrated device — the iPod. Apple is in a great position to roll out new features across its online store and its devices at the same time.

Microsoft’s Zune is another place to watch for this, for the same reasons. It also has the integrated service and device, as well as ownership of the technical building blocks needed (such as Windows Media Player). And since it’s still lagging far behind Apple in the digital music game, Microsoft could easily tap digital extras as a battleground for new market share.

In the year ahead, look for several efforts from both camps as digital music distribution becomes more important to the music industry as well as a point of increasing competition among service providers.