Everyone with an interest in fiction should read this piece at Mother Jones, if you haven't already. Times are hard for litmags (most of them, anyway; but more about that in a sec). This piece has been out for a while, but I'm thinking about this now because it's gotten tied up in my head with this other piece, by Ted Gioia, called "Notes on Conceptual Fiction," at the website Conceptual Fiction.
Read them both and ask yourself: are litmags dying not because people don't read, but because litmags are clinging to literary models that are historically transient but assumed by the literary-academic establishment to be permanent? (I ask this question from a perspective within said establishment. I'm not hostile to it. But I do think that it, like any other respected and powerful institution, is very slow to react to cultural changes, and has a set of blinders that it tends not to notice until they are pointed out...like, say, by the death of literary magazines.)
I think it's no coincidence that the strongest literary magazines right now are the ones least beholden to an editorial vision centered on psychological realism and the standard kind of beautifully arid atmosphere pieces that seem to be the primary product of intense MFA-program workshopping.
And, putting on my genre-nerd hat, let me say that I love the Gioia piece because it avoids the cheerleading instinct so common to genre apologia. It is possible, indeed desirable, to talk about what genre fiction does well without falling prey to zero-sum thinking and arguing that because genre fiction does some things well, literary or realist fiction does not, cannot, must forever be considered the wan and lonely spinster of the family of literatures. Everything can be good. Most things aren't.