Lots of people, actually. We’re more than a decade past Napster, and eight years past iTunes, but the majority of the music industry’s revenue still comes from discs.

Even for new stuff! In the same week that Amazon all but gave away digital copies of Lady Gaga’s new album last month, discs made up almost half of her sales.

Amazing!

My hunch is that, increasingly, the people who are buying music in physical form are divided into two groups. There are the people buying it as an afterthought along with gum and other impulse buys stacked near the cash register. And there are the people buying it because they really like stuff — physical, tactile stuff — which might be as important as the music itself.

Here’s stuff for the latter group: Lavish boxed sets from Sony, via its Pop Market Web store. These are collections of ye olde timey music, designed to appeal to generations who remember the world before Netscape and who most likely remember the world before FM radio, too.

Perhaps the kind of people who would drop $99 on an 11-disc Aretha Franklin set. Or $80 on the Byrds. Or maybe even $269 on Miles Davis. (Thanks to Digital Music News for flagging.)

Some of you may be stifling the impulse to titter here. But these things do well for Sony, with good reason: As long as you have an interest in owning and/or playing compact discs, you’re getting good bang for your buck when it comes to the music, at least in raw tonnage.

And if you’re into looking at 5-inch by 5-inch reproductions of old album covers, etc., you’ll be doubly pleased. Nothing wrong with that.

Okey doke. I’m off to hear new stuff at Turntable.fm.

The free program that Amazon (AMZN) created for Apple’s (AAPL) phone is a powerful tool, and from what I can tell, it works equally well on Research in Motion’s (RIMM) devices.

My BlackBerry 8830 doesn’t have a camera (maddeningly), so I can’t test out the photo-match feature, where users submit a picture of something to Amazon and the retailer tries to find something similar in its catalog.

But I can testify that it’s dismayingly easy to buy something using the app, which is why I’m on the hook for an Aretha Franklin CD headed my way right now.

Aside: Play with the Amazon app for more than a couple of minutes, and you can start to get an idea of how mobile advertising, currently in the “should be big one day” phase, could actually be big. Combine digitally delivered coupons–for stuff I actually want–with powerful e-commerce apps like these, and there might actually be a market for mobile ads.

Previously, BoomTown decoded the first mean Saturday letter, sent at the beginning of April by Microsoft (MSFT) CEO Steve Ballmer to Yahoo’s (YHOO) CEO Jerry Yang, in which Ballmer threatened to go hostile with his unsolicited takeover bid.

But this new one sent yesterday is a such a doozy that it cannot be ignored.

Thus, we wade in with really big boots.

Ballmer wrote: May 3, 2008

Dear Jerry:

Translation: Saturday, bloody Saturday. Redux!

Ballmer wrote: After over three months, we have reached the conclusion of the process regarding a possible combination of Microsoft and Yahoo.

Translation: It just occurred to me today that maybe you don’t like us and I am bereft. Despite copious evidence that I am, well, somewhat of a bully, do you know that I am really a very sensitive man and cry big sloppy tears when I am all by myself alone?

Ballmer wrote: I first want to convey my personal thanks to you, your management team, and Yahoo’s Board of Directors for your consideration of our proposal. I appreciate the time and attention all of you have given to this matter, and I especially appreciate the time that you have invested personally. I feel that our discussions this week have been particularly useful, providing me for the first time with real clarity on what is and is not possible.

Translation: You like Google (GOOG) better, I see that now. All those times when I thought you were dealing with my unsolicited offer for Yahoo, all you were thinking of was Larry and Sergey, Larry and Sergey, Larry and Sergey.

I feel foolish now for throwing my tens of billions at you.

Ballmer wrote: I am disappointed that Yahoo has not moved toward accepting our offer. I first called you with our offer on Jan. 31 because I believed that a combination of our two companies would have created real value for our respective shareholders and would have provided consumers, publishers and advertisers with greater innovation and choice in the marketplace. Our decision to offer a 62% premium at that time reflected the strength of these convictions.

Translation: When I called you on Jan. 31, I thought you would jump at the chance to get a 62% premium. Was it too much? Should I have been more withholding?

Ballmer wrote: In our conversations this week, we conveyed our willingness to raise our offer to $33 per share, reflecting again our belief in this collective opportunity. This increase would have added approximately another $5 billion of value to your shareholders, compared to the current value of our initial offer. It also would have reflected a premium of over 70% compared to the price at which your stock closed on Jan. 31. Yet it has proven insufficient, as your final position insisted on Microsoft paying yet another $5 billion or more, or at least another $4 per share above our $33 offer.

Translation: And still, it’s not enough. As Miss Aretha Franklin sings: “A little respect (sock it to me, sock it to me, sock it to me, sock it to me)/Whoa, babe (just a little bit)/A little respect (just a little bit).

Oh, snap!

Ballmer wrote: Also, after giving this week’s conversations further thought, it is clear to me that it is not sensible for Microsoft to take our offer directly to your shareholders. This approach would necessarily involve a protracted proxy contest and eventually an exchange offer. Our discussions with you have led us to conclude that, in the interim, you would take steps that would make Yahoo! undesirable as an acquisition for Microsoft.

We regard with particular concern your apparent planning to respond to a “hostile” bid by pursuing a new arrangement that would involve or lead to the outsourcing to Google of key paid Internet search terms offered by Yahoo today. In our view, such an arrangement with the dominant search provider would make an acquisition of Yahoo undesirable to us for a number of reasons:

Translation: Marbles. Taking my. Home going.

And if you like Google so much, why don’t you marry it? (If you do, of course, my lobbyists in Washington will be at the ready to pounce!)

Ballmer wrote: – First, it would fundamentally undermine Yahoo’s own strategy and long-term viability by encouraging advertisers to use Google as opposed to your Panama paid search system. This would also fragment your search advertising and display advertising strategies and the ecosystem surrounding them. This would undermine the reliance on your display advertising business to fuel future growth.

– It could foreclose any chance of a combination with any other search provider that is not already relying on Google’s search services.

Translation: Don’t you realize AdSense is only the beginning?

Don’t you see that Google will become self-aware in 2012 and start to build cybernetic organisms (living tissue over a metal endoskeleton) to send back and hunt down our future human leaders?

Don’t you know “Don’t Be Evil” is actually “Don’t Be Evil About Entertaining” and that it’s a…it’s a cookbook! (see below from “The Twilight Zone.”)

Ballmer wrote: Accordingly, your apparent plan to pursue such an arrangement in the event of a proxy contest or exchange offer leads me to the firm decision not to pursue such a path. Instead, I hereby formally withdraw Microsoft’s proposal to acquire Yahoo.

We will move forward and will continue to innovate and grow our business at Microsoft with the talented team we have in place and potentially through strategic transactions with other business partners.

Translation: If you prick us, do we not bleed? If you tickle us, do we not laugh? If you poison us, do we not die? And if you wrong Microsoft, shall we not revenge?

(But no tickling!)

Ballmer wrote: I still believe even today that our offer remains the only alternative put forward that provides your stockholders full and fair value for their shares. By failing to reach an agreement with us, you and your stockholders have left significant value on the table.

But clearly a deal is not to be.

Translation: In the immortal words of Mr. Terminator himself, Arnold Schwarzenegger, from his role in “Last Action Hero” as Hamlet:

“To be or not to be. Not to be!” (See video below.)

Ballmer wrote: Thank you again for the time we have spent together discussing this.

Microsoft Corporation

Translation: Hasta la vista, Jerry! You won’t have Stevie to kick around anymore!