Increasingly, creative types are harnessing what I’ve begun to call “the T-shirt economy”—paying for bits by selling atoms. Charging for content online is hard, often impossible. Even 10 cents for a download of something like Red vs. Blue might drive away the fans. So instead of fighting this dynamic, today’s smart artists are simply adapting to it.

Their algorithm is simple: First, don’t limit your audience by insisting they pay to see your work. Instead, let your content roam freely online, so it generates as large an audience as possible. Then cash in on your fans’ desire to sport merchandise that declares their allegiance to you.

We’re talking about a surprisingly big market. According to Impressions, a clothing industry trade publication, Americans spend around $40 billion a year on decorated apparel. At CafePress, a Web site that lets anyone customize and sell merchandise, users sold more than $100 million in goods in 2007—pocketing $20 million in profits—and overall sales are growing an average of 60 percent a year.

As you might expect, the T-shirt economy is a long tail phenomenon, with comparatively few people making a full-time living while millions earn only a few hundred or thousand bucks a year. On the high revenue end, you’ve got companies like BustedTees—an offshoot of the funny-video portal CollegeHumor—which, with a staff of eight, expects to clear a 20 percent profit on sales of 350,000-plus shirts for 2008. In the middle are outfits like RightWingStuff, which hawks T-shirts mocking the left. And on the far end of the tail are people like David Friedman, a New York photographer who cooks up three or four witty ideas a year—like his series of T-shirts adorned with fictional corporate logos that are blurrily “pixelated,” as if on reality TV—and makes just enough money to cover his hosting fees, plus a bit of pocket change.

Full Story: Wired