(FORTUNE Magazine) – Because comedians tend to be loners, there is no such thing as the American Humor Association. But if there were, the seven-year-old U.S. Comedy Arts Festival, which is held every winter in Aspen, could easily pass for its annual convention. This year's festival, sponsored by HBO, brought about 1,300 comedy industry people to Colorado. Most flew in from the coast. The conferees include TV network and studio executives, casting directors, producers, agents, reporters, and about 200 comedians. They range from the famously funny--Billy Crystal, Steve Martin, and Bob Newhart--to the dozens of fringe players, one of whom we'll meet in a moment, competing to get a laugh out of the talent scouts. Most of the unknowns, alas, will stay that way. Comedy is not always a happy business.

Like most conventions, this one offers an uplifting theme--Taking Comedy to New Heights--and panel discussions about industry issues. Telecommunications provider WorldCom, a firm not known, until now, for hilarity, sponsors a two-day "Comedy Technology Summit," where pundits, executives, and comedians opine on the future of digital entertainment. Enthusiasm for the Internet is muted, at best. Steve Martin recalls that he made three short films for Pop.com, the Website developed by DreamWorks and Paul Allen. "I was approached with stock options and Internet riches," Martin says. "Signed up immediately, and it folded in six months." Satirist Harry Shearer, meanwhile, has no use for the Internet's promise of interactivity. "There has always been interactivity in comedy," he notes. "It's called heckling, and we don't like it. Our idea of a perfect audience is, you shut up till you laugh, and then you shut up again." Then again, legendary manager Bernie Brillstein vouches for the Internet's transformational power by saying, "I am the only person here whose ex-wife flirted on the Internet, went to meet the guy, never having met him, and ended up marrying him. In Salt Lake City, of all places." A Hollywood old-timer, Brillstein seems less shocked by his ex's departure than by her relocation to Utah.

For the five days that the comedy crowd is in town, Aspen's ski slopes are empty. But the hotel lobbies are packed with executives taking meetings; chic restaurants are crowded with expense-account diners; trade magazines throw parties; and men walk the streets talking out loud, drawing stares from onlookers who can't tell whether they're carrying cell phones. "Is this an indie filmmaker or a crazy guy? Do I ingratiate myself or do I walk away?" asks the comedian and actress Janeane Garofalo. Naturally the festival offers awards and tributes, in part because industry leaders believe comedy needs to be taken more seriously. They still talk about the Oscar bestowed on Annie Hall, one of the very few comedies to be named Best Picture. "You can't imagine Adam Sandler or Jerry Lewis or Jim Carrey getting serious acknowledgement for what they do," says Stu Smiley, the festival's executive director. At the tributes, the word "genius" is tossed around a fair bit.

There is no exhibition hall at this convention (what would be on display, whoopee cushions?), but that doesn't mean serious business isn't done here. The festival becomes a marketplace where buyers and sellers negotiate deals with multimillion-dollar implications for big companies like AOL Time Warner (parent of FORTUNE's publisher), Viacom, and Disney--only what's being sold is talent.

Which is why, at a little past 11 on the festival's opening night, an actress and comedian named Stephanie Courtney makes her way to the microphone in front of about 100 people at the St. Regis Hotel. She tells a joke about those Christmas form letters people send out, does a Cher impersonation, and then plays a fortune-teller hired to entertain at a party where everyone's older than 75. "Okay, John, let's read your tarot cards," she says. "Uh-oh. Don't drive yourself home tonight." To another guest: "Write a letter saying all the things you haven't said to loved ones."

The crowd is terribly quiet. When asked the next day about Stephanie's debut, Judi Brown, the festival's head of talent--who invited her to perform in Aspen and thinks she has great potential--shakes her head. "If you like the sound of crickets..." she says, her voice trailing off. "It was crash and burn."

Stephanie knows it went badly. "It definitely shook me up a little," she says later. "It was like, all right, oops, what am I going to do now?" She'll be performing every night she's here, so she hurriedly refashions her act, fearful that her low-key brand of humor, crafted for L.A. coffeehouses and alternative "spoken word" venues, may be too slow-paced for festival audiences. "They want a lot of laughs per set," Stephanie says. "Maybe they don't want to sit through a huge buildup to your little wordy joke that ends cleverly."

Happily, Stephanie's standup routine isn't her only chance to impress the comedy establishment; she's also performing daily in a play she wrote with her sister, Jennifer, called Those Courtney Girls. Unhappily, it, too, had a rocky debut. Cues were missed, props misplaced, and the actors were distracted. "That show just kind of broke my heart a little bit," Stephanie says. In the 40-minute performance, she and Jennifer play themselves--unknown actresses who share a small apartment in Hollywood, work as "cater waiters," go to auditions, and hope that somehow, someday, they'll get a shot at performing on TV or in the movies.

This week in Aspen is Stephanie's best shot yet, and she's off to a disappointing start. But she has time to redeem herself.

Comedy is an $8-billion- to $10-billion-a-year business, maybe more. That's a back-of-the-envelope estimate that takes into account the advertising and syndication sales of TV sitcoms, ad sales for late-night shows, the grosses of comedy movies, the revenue of the Comedy Central cable network, and ticket sales for live acts. Keeping that many enterprises afloat takes lots of funny people, who make a lot of money if they rise to the top; that's why Harvard graduates who could aspire to positions at McKinsey become gag writers for Conan O'Brien.

Finding funny people isn't hard; what's hard is finding people who are funny and likable and able to act in a TV sitcom--which is where the biggest money in comedy is to be made. Sure, Jim Carrey gets $20 million to star in movies--or at least he did, before Me, Myself, and Irene--but Kelsey Grammer, the star of Frasier, will earn about $2 million for each of the 75 or so episodes to be made under a three-year deal just signed by Paramount and NBC. Sitcom stars who own equity in their shows, as many do, can make millions more when reruns are sold to local TV stations. And even supporting players earn $15,000 to $25,000 a week.

"Big bucks. Longevity. It's just so lucrative," explains John Moffitt, the festival's executive producer. "If you're Drew Carey, you do standup and you've gone as far as you can go. Now he's parlayed his brand of comedy into a sitcom. Once you have a sitcom, you can move on to movies, or just fantastic bucks in Vegas or big arenas."

The trouble is, some great standups--George Carlin and Jackie Mason come to mind--who try their hand at TV sitcoms fail because they can't get past their shtick. So the producers and agents who flock to Aspen look for people who can do more than tell jokes. Says Adam Cohen, an agent at International Creative Management: "If you can find a funny person who can act, then you've got a gold mine."

And if that funny person who can act happens to be an attractive woman, then you're really in business. "Everyone tells me, 'We're looking for a beautiful woman who's really funny,' " sighs Judi Brown, who sees about 2,000 acts a year in her capacity as talent scout. "But it's like looking for an oxymoron. Standup comes from a place of pain."

So when Brown saw Those Courtney Girls at an L.A. workshop and learned that Stephanie also does standup, she took notice. Neither acerbic nor seductive, Stephanie projects a sweetness tinged with mischief. "She's got a nice TV look to her," Brown says. "I think she's destined for success, because she's proved that she can act."

You've almost certainly seen--or at least glimpsed--Stephanie Courtney. Two years ago she appeared in a Budweiser commercial that debuted during the Super Bowl. It's the one where two slackers go to a convenience store, load up on groceries and toilet paper and a six-pack, realize they're short of cash when they get to the checkout, and keep only the beer. Behind them, looking frustrated, stands Stephanie. "Annoyed Face No. 5" is how she describes the role.

It was significant not because it led to other parts but because the residuals, which totaled about $38,000 before taxes and agency fees, helped keep her afloat for a couple of years. Stephanie has also toiled as a waitress for catering companies, as a temp for a concierge service, and, during a mid-1990s stint in New York, as the secretary on the 6 P.M. to 11 P.M. shift for Robert S. Greenhill, then chairman of Smith Barney. Taking on just enough paid work to make ends meet while giving herself time for comedy is "a definite juggling act," she says. "Every night I want to do something--either see a show or be in a show or do standup or do an open mike." By keeping costs down--the apartment she shares with Jennifer rents for $1,030 a month--she has gotten by on about $20,000 a year since graduating from college in 1992.

Stephanie has acted ever since she was a kid in Rockland County, N.Y., where her dad is a retired high school history teacher and her mom is a singer. But aside from a handful of commercials, she has made almost no money from performing for nine years. In New York she did some children's theater but says, "It was just a horrible experience for everyone. The children were not entertained enough. I wasn't getting paid enough. I was in an elephant costume. I was sweating a lot." She once got $150 to do standup at a Christmas party, and she's performed a few times at a Hollywood club called Largo that pays $20 a set. "Comedy is a tough, lonely way to make a living," says Adam Venit, a partner at the Endeavor talent agency.

Now Stephanie feels she's on the verge of a breakthrough. After years without representation, she has a well-connected manager in Naomi Odenkirk, whose husband, Bob, a former Saturday Night Live writer, is known as a comedian's comedian. He agreed to direct Those Courtney Girls, which gave the show instant cachet. Stephanie also has a pair of agents, one for TV and movies, the other for commercials. More of her auditions are leading to call-backs, and the L.A. performances of Those Courtney Girls--which she describes as a "shameless pilot presentation"--got her a meeting at Studios USA, the TV production unit of Barry Diller's USA Networks.

Here at Aspen, the second performance of Those Courtney Girls draws a large, appreciative audience. At a pivotal moment, when Stephanie loses the man of her dreams to Jennifer, the spectators let out a collective groan--and Stephanie knows she's got them.

Bernie Brillstein, who knows the Odenkirks, comes backstage afterward to offer encouragement. "You guys look great together," he tells the sisters. "You can't cast for the kind of rapport you have, growing up together." Coming from Brillstein, who has been a force in comedy for 25 years--his past clients include Jim Henson, John Belushi, and Gilda Radner--the praise means a lot. Just for a moment, Stephanie is beaming.

When Stephanie and I meet for lunch the next day at the Hotel Jerome, Stu Bloomberg, co-chairman of ABC Entertainment, is dining with Dave Gorman, a British comedian who has become the talk of Aspen. In his one-man show, Are You Dave Gorman?, he recounts the story of his obsessive search for other people named Dave Gorman; it's inventive and hilarious and, best of all, fits the current TV craze for alternative programming. ABC wants to make a deal, but Gorman, who is well established in Britain, won't be swept up by the Aspen frenzy. "I'm going to make up my mind at sea level," he says. Stephanie, meanwhile, is content to settle for a friendly introduction to Bloomberg.

The festival closes with a party that lasts until 4 A.M.; by the next afternoon Aspen's streets are quiet again. Back home in L.A., Stephanie's got three auditions coming up--one for a commercial, another for a voice-over, a third for a sitcom pilot--and she's also got some good news. She's been asked to do standup on Late Friday, an NBC late-night show whose booker saw her at Largo. It'll be her first TV credit, a big step even though the show airs at 1:30 A.M.

Better yet: Having seen Stephanie at Aspen, Amy Palmer, an executive with a Hollywood production company called Davis Entertainment, which has made such movies as Grumpy Old Men and Dr. Dolittle, is going to pitch the Courtney Girls show--as a sitcom--to Columbia TriStar Television. Palmer thinks the sisters could become America's sweethearts. "TV is character-driven," Palmer says. "It's about liking these characters well enough to come back every week for five or six years."

Stephanie isn't getting excited yet. She's had enough close calls to know that there are no guarantees in Hollywood. Even if studio executives want to make the show, they'll have to sell it to a network first, and then it's by no means clear that Stephanie and Jennifer and the Odenkirks would all stay attached to the project. In other words, the future couldn't be any more unpredictable. But Stephanie has learned that uncertainty is as much a part of the comedy trade as smoke-filled clubs and dirty jokes. "The ups and downs are crazy," she says. "But the ups are great." No kidding.

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