Interestingly enough, the November issue of Wired magazine dealt with the doujinshi market in Japan. An issue discussed in the magazine but so far not discussed here is copyright law. After all, fanfiction writers take the copyrighted characters and themes and do something with them. However, the author of the article stated that Japan manga creators and doujinshi creators have an
amnoku no ryokai or "unspoken, implicit agreement" between the two groups that goes along the lines of manga creators not sueing doujinshi creators as long as doujinshi creators don't do anything that negatively affects the market of the canon stories.
Anyway, here is what the author states as the reasons for allowing doujinshi, which can apply to fanfiction in general:
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First, and mostly, its a customer care program. The dojinshi devotees are manga's fiercest fans. "We're not denying the viability or importance of intellectual property, "says Kasuhiko Torishima, an executive at the publishing behemoth Sheisha. "But when the numbers speak, you have to listen."
This is confirmed later in the article when the author talks to Ageha Ohkawa, head of Clamp. During the time the author of the article takes out a couple of doujinshi, at which point Ohkawa laughs and says
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"Any popular manga is going to have this treatment done....It is by the people who are truly in love with the work"
and goes on to say
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"I think it's good because they are expressing love for the work. And, of course, we [Clamp] come from the dojinshi world, so I understand this."
This is relevant because Clamp started out as a doujinshi-creating circle, but more on that later.
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Second, as [Keiji] Takeda put it at Super Comic Ciy, "this is the soil for new talent." While most dojinshi creators have no aspirations to become manga superstars, several artists have used the comic markets to springboard into mainstream success. The best example is Clamp, which began as a circle of a dozen college women selling self-published work at comic markets in the Kansai region. Today Clamp's members are manga rock stars; they have sold close to 100 million books worldwide.
So basically even though many fanfiction writers are not interesting in furthering their career in storytelling, there are probably fanfiction writers who are. Fanfic writers can use fanfiction writing to a) devolop their talents and b) launch their writing careers. Like in the case of Clamp.
Anyway, perhaps most fanfiction is crap, but there are merits for fanfiction.