* Illustration: John Gall * In 2003, Burnie Burns got together with three friends and created Red vs. Blue—an animated comedy series set in the world of first-person shooter Halo. Nerds loved it, and within months nearly a million people were downloading each week's free show.

Burns & Co. decided they wanted to quit their jobs and work on the series full-time. So they figured out a way to do it: T-shirts.

Burns appropriated the comedy's wittiest one-liners and set up an online store to sell shirts and caps. Within months, he was filling hundreds of orders a week, generating enough revenue to pay everyone a salary. "The shirts," he says, "turned us from a hobby into a business."

Burns is not alone. 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.

Bands have relied on merch sales for years. But today's instant-customization technology has supercharged the T-shirt economy by dropping the cost of entry to zero. With a Zazzle or CafePress store, you don't need to put down any capital; the very first sale is profitable. This allows artists to speculate with dozens of designs until they hit on one that catches their fans' attention. "When you drive the risk to zero, you really open the floodgates," says Fred Durham, cofounder of CafePress.

Of course, it's a little ironic that artists who've harnessed the digital world to distribute their work have to rely on semi-disposable clothing to finance it. And the business model doesn't work for everyone. Jonathan Coulton, a musician who sells merchandise online, says he can make more money by simply forging an emotional bond with his fans so they'll pay cash for his MP3s. Fair enough: Charging for bits is way more profitable than charging for atoms. But not many consumers are willing to pay for podcasts, videocasts, or blog content—and that's where the T-shirt economy helps out.

Creators of this media don't need to make big bucks or bleed you dry. They're just looking to put their shirt on your back.

Email clive@clivethompson.net.

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