Nina Paley is my new hero. She made a film called Sita Sings the Blues and distributed it for free on the Internet. She makes her money from selling dvds and merchandise. Her first distribution report is available for you to read, but basically she made about $40 000 in the first two months.
Definitely check out her essay Understanding Free Content on the QuestionCopyright site. Here are some excerpts:
Content is an unlimited resource. People can now make perfect copies of digital content for free. That's why they expect content to be free — because it is in fact free. That is GOOD.Think of "content" — culture — as water. Where water flows, life flourishes.
Containers — objects like books, DVDs, hard drives, apparel, action figures, and prints — are not free. They are a limited resource. No one expects these objects to be free, and people voluntarily pay good money for them.
Continuing this metaphor: copyright monopolies are an attempt to dam up and control all the rivers, reducing them to a trickle. When Big Media succeeds locking up culture, it's like in closing off water: they get a stagnant pool that turns to poison. Fish die and mosquitoes swarm, because the water has no source to flow from nor destination to flow to.
Go read the rest of the piece. It's inspiring.