Lewis Shiner is one of the great science fiction writers of the last 30 years, author of the World Fantasy Award-winning novel Glimpses (a book I've re-read 10 times, which haunts me every time I hear a Beatles, Beach Boys, Doors, or Jimi Hendrix song). Unfortunately, all his novels are out of print (the exception being a new audiobook, which I just ordered). He also edited a seminal anti-war science fiction anthology, When The Music's Over that I read until it came apart. Shiner was also an early cyberpunk, who had two stories in Bruce Sterling's ground-breaking anthology Mirrorshades
Shiner posted his fiction along with a manifesto about the collapse of short fiction markets and the importance of short fiction as a way for writers to experiment and for readers to discover new writers. He calls the project the "Fiction Liberation Front."
It's hardly news that the Internet Revolution has toppled the traditional short story markets. If you look through the periodical racks at one of the big chain bookstores (what passes for a newsstand in most of the US these days), you'll be hard pressed to find a magazine devoted to fiction. It's been a slow decline since the heyday of the pulps, true, but the last few years have seen even the remaining SF and mystery digests falling back to a subscription model.Link
What we don't know is what comes next. Some magazines, like Subterranean, have moved online; many have just gone under. Even the idea of a magazine may cease to be relevant. The only thing that seems likely is that whatever future the short story has, the Internet will be involved in it. The thing that's least clear is how--or whether--artists will be compensated for their efforts.
There's been no living to be made from short stories in my lifetime. But short fiction endures because it provides a way of introducing writers to new readers, and because there are stories that need to be told at that length.
I write books. My latest is a YA science fiction novel called Homeland (it's the sequel to Little Brother). More books: Rapture of the Nerds (a novel, with Charlie Stross); With a Little Help (short stories); and The Great Big Beautiful Tomorrow (novella and nonfic). I speak all over the place and I tweet and tumble, too.