You can’t profit off of fanfiction. Or can you?
Fanfiction, fiction written about fiction by the fans of said fiction, has existed for as long as fiction itself. Many folktales could be considered fanfiction. If someone besides Aesop comes up with a fable using Aesop’s characters, that’s in the general spirit of fanfiction.
Fanfiction straddles a border between the right to be creative and draw inspiration, and the right to own one’s own creations under copyright. For a long time online, it was a fight simply to allow fanfiction to exist where others could read it, works crafted simply for the love of the original series and the other members of the fanbase. Ann Rice was famously litigious around any fanfiction of her Interview With a Vampire series. Remnants of this period are unfortunately few, but when you see something like “I don’t own these characters and don’t make profit off of this work, please don’t sue me”, you’re seeing a response to the environment created in the wake of overly strict copyright enforcement.
Today, fanfiction is allowed simply to exist on the open web, but its creators are not allowed to draw profit from it. Larger websites like Archive of Our Own are strictly nonprofit, and explicitly forbid their authors from using their works to promote their Patreons because this could be interpreted as profiting off the work, which is still a legal minefield.
However, that’s not to say that fanfiction can’t be used to make money, full stop. Outside of its obvious usefulness as practice for totally independent works, a completed fanfiction is in itself a work of art. In the right hands, a pre-existing work of fiction can be molded into something totally different, while only retaining the core characters. There’s a trope within fandom spaces of the “Coffee Shop AU” – AU stands for Alternate Universe, as in an alternate universe where it makes sense for Scully of X Files fame to be working in a coffee shop, and see Mulder as one of the regulars. Or, hey, what if SpongeBob was in Star Wars as Luke, and Squidward was Darth Vader? The SpongeBob Star Wars AU? What would they get up to? The limits of fanfiction are nonexistent – the only limit is the human imagination. If someone were to slightly tweak the names, the setting is already completely different. It would become a different work of fiction, one that could be sold without violating copyright laws.
This has already happened, in fact – at least two separate books that imagine Rey and Kylo Ren from Star Wars getting together under better circumstances have been published by separate authors, free and clear of copyright issues. While the source material was the same, and they both in theory feature a character similar to Rey and a character similar to Kylo Ren, the two are wildly different from both the source and each other. Every fanfiction is, barring actual plagiarism, because even mainstays such as the Coffee Shop AU are interpreted totally differently by each individual writer taking a crack at it.
Many of these writers found a fanbase because they were able to publish their fanfiction for free on websites designed for the purpose. People could access their work, for free, because publishing it was necessarily free. The author was able to connect to people who were looking for something to read because they love a particular show or book series, and out of that, build something familiar but new. This system, where completed works can be uploaded for public comment, couldn’t have existed just a decade prior – the copyright system is a bit of a mess, but at least fanfiction’s right to exist at all in public is being defended. If it wasn’t, many great writers would never try to publish anything at all for a lack of practice or reassurance that there are people willing to read what they write.