system
Given the following post, respond as if you're commenting on Reddit:
human
ELI5: Why can musicians legally make and sell cover albums of popular music, but as an artist, if create a stylized rendition of an iconic character I am unable to do the same?

A little more context to the above question. I was sitting enjoying my morning coffee and listening to some streaming video game music. I heard a track from Kingdom Hearts that sounded familiar, but slightly different and it turned out it was fan reinvisioning of the original track. After some searching I found the track up on Loudr with an entire album for purchase. This got me thinking.

Why is it okay for musicians to parody a score that they didn't originally create, but not okay for traditional or digital artists to do the same with characters? It appears that many musicians make income by doing covers albums of popular music (in this case video game soundtracks) and it is perfectly legal. However, say if I were to make a stylized 3D figuring of Mario and sell them online I'd most certainly be issued a Cease and Desist from Nintendo. 

Any insight would be greatly appreciated. :)
gpt
When cover songs/albums are sold, if you read the liner notes on the album, the original artist/owner of the song is credited. Behind the scenes, the artist's record company is paying licensing fees to the original artist for the privilege of making money off their song.

You could do the same with art f you had a licensing agreement with whatever person or organization owns the character - but as a single, solo artist, it's generally not going to be worth their while to bother licensing that character out to you. Not enough profit for them in it to be worth the time and money to set up the contract.

Edit to add: Parody is a special case. Parody is covered under 'fair use' in copyright laws - if you're making fun of something you can generally use it as long as your parody falls on the correct side of the slander/libel line. This is also how Robot Chicken works. Their cartoons are acts of parody - but also, they pretty frequently have the original actor's permission, and often even have the original actor providing the voice!

Remixes are kind of a grey area as far as 'fair use' goes. Depending on how much of the original material you use and how much is your own composition, you can claim 'fair use' - but to be honest, a lot of people who release fan music just count on not making big enough sales to get attention and get shut down.