Good news for music companies: P2P traffic is said to be declining while streaming sites are growing in popularity and becoming more a more integral part of labels’ and publishers’ strategies. P2P traffic “is declining quickly” and losing popularity to streaming video, said Craig Labovitz , the chief scientist at Arbor Networks. Why? “P2P is a headache” he told CNET’s Epicenter blog, which earlier this week previewed Arbor Networks’ findings.

Take a look at some of the numbers offered by Arbor Networks: P2P accounts for 18% of Internet traffic, down from 40% of Internet traffic in 2007. The Web now accounts for 50% of Internet traffic, says Arbor, up from 10% in 2007. That increase is fueled by increases in usage of streaming sites like YouTube and higher use of Flash and Silverlight (which support multimedia streaming). File upload site MegaUpload.com, which is a cumbersome form of file sharing, has about one percent of Internet traffic.

Arbor Networks’ research echoes findings in the music space by The Leading Question. In that research, The Leading Question found teens are switching to streaming from P2P applications.

CNET’s article does not distinguish between P2P usage for music and video programs. While P2P may be a headache for a movies and television programs, which require large files and long download times, it is different for music. Songs are small files that take very little time to download.

Even though downloading music is less of a headache than downloading movies, legal streaming sites have the potential to divert P2P traffic and sell advertisements in the process. Video sites in particular allow for a positive transition from P2P to streaming. Interscope’s Jimmy Iovine recently predicted that Vevo, a YouTube-powered music video site with major label content, “will be a giant step forward for the industry.” It should launch this December.

The monetization potential can only be guessed at this point, but it is there. In its Q3 earnings call on Thursday, Google said YouTube is currently monetizing – not streaming, but monetizing – over one billion videos per week and ninety percent of its home page inventory was sold out in Q3. And when you look at the deal Warner Music Group put together with YouTube, you can understand how monetization of music videos have all sorts of untapped potential. That potential does not have a clear dollar value, however, and predicting an outcome in this unpredictable industry has all the certainty of rolling dice. But these developments offer some evidence that monetization of video streaming is one strategy that music companies are clearly correct to pursue.