Over on Cartoon Brew there's an interesting, intelligent and civil debate regarding Nina Paley's Sita Sings the Blues- and specifically the challenges of making any money from a feature film that is given away freely via a Creative Commons license.
Copyright is at a crossroads. The very foundation of its power has been destroyed- namely, the ability to control when, where and how a work of art is experienced by the public. The crack in the armor of copyright has existed for decades. People have been making bootleg VHS tapes or DVDs of movies and cassette tapes and CDs of music for 30 years. But the internet has taken this crack and blown it wide open into a massive gaping wound. People now have a cheap and worldwide distribution channel to send those copies - at high quality- all around the world with a few simple clicks. Pandora's box is open. As a broadcast and distribution system the internet is over 15 years old and still nobody has found a way to successfully tame this beast. By now it is beyond control. Tip at those windmills all you want, Don Quixote. They will not fall. Content will find it's way 'out there' no matter what. From the perspective of building an audience and a following you couldn't ask for a better scenario. From the perspective of making money, you couldn't ask for a worse one.
There are probably a billion internet users in the world- all consuming media and just about all of them doing so for free. The internet has tattooed the idea onto the cultural subconscious that media is free for the taking and requires no tangible expression of value in return. We can try to find a way to change this (and lots and lots of folks are really trying), but I'm about 97% convinced that it is a lost cause.
So what's left? The business model for creatives in an online world consists of a few loosely connected constructs. Selling artifacts of the creation, selling some kind of a personal experience or relationship with the creator and basically relying on the charitable kindness of strangers. Will this be enough? Ancillary merchandise is indeed a money maker, but is it a core money maker? Is it enough to keep the business moving forward as an uninterrupted going concern, making new works of art and being a viable entity in the marketplace? I have my doubts. If this were a viable core business model then Disney would issue free admission to every movie they make and set up toy stands and trinket carts in the lobby and pay the theater owners from those proceeds.
Currently the most common (and successful) business model comes in the form of parlaying our personal reputations as creators into something people really value (ie: PAY FOR), while we make our art in our spare time. Nina's monetary success or failure with SSTB is a very big test case. The real litmus test for me will not be if she makes a nominal profit from SSTB. The real test will be whether or not the funds from SSTB will afford her the opportunity to make another film in the near future, and then another after that. The world is a better place when Nina Paley is making films, not when she's doing 'other things' to pay the bills. I'm pretty sure she believes the same. I spend the bulk of my time running a teaching business for animation, and precious little of it actually animating or creating new films. 15 years ago as an aspiring animated filmmaker I worked a day job and animated on my films at night. Today I still work a day job and animate at night. I just like my day job better now, that's all. ;) However my concern is that the internet will reduce filmmakers, artists and creators to perpetual hobbyist status. We'll all end up virtual street performers, our PayPal Donate buttons the digital equivalent of a hat on the sidewalk.