Does this mean SF/F just isn't lucrative anymore? I look at a lot of listings for literary agents here in the UK and over the pond in the US, and most state 'no SF/F'. But why? Surely SF/F is still popular, otherwise Harry Potter would never have exploded as it did. Maybe it's just oversaturation. Looking online, there are a whole host of SF/F/H small presses. Then again, they're not all the same and they work with different niches. Subterranean Press (one of my favourites) are very different to PS Publishing (another of my favourites), and both are different again to Prime Books and Razorblade Press.
I myself publish, edit and write SF/F/H as well as literary works, and actually the SF/F/H stuff pays better at the short story level. Most literary magazines do not offer pro rates of pay, whilst F&SF, Analog, Brutarian, Jim Baen's Universe and co, all do.
Maybe it's not oversaturation of the spec fic market, but oversaturation of all markets. Lulu.com and LSI, whilst excellent for levelling the field, enable anyone with a PC to publish. I have to stress that I love the opportunities POD offers, but how many books can people read/afford/write? If there are 300 titles on the same subject, with the same plots and similar characters, isn't that overkill? And does the modern reader even have time for novels anymore? Many people I know will only read a couple of books a year, and those are both bestsellers. That's a sad state of affairs, and one that probably doesn't apply to readers here, but is it representative? If you're reading this blog, you probably read lots, and possibly write too. We're probably unrepresentative.
Then again, so many people think they can write these days, maybe we're not. I'm a member of a few online workshops and I see lots of substandard or mediocre prose. Maybe that's the real reason the small presses are tightening their catalogues. Maybe I've just become pickier about writing because of the amount I've read, and so now I think average prose is terrible and good prose is mediocre. Maybe the publishers have picked up on that too and have had to select only the best and most striking of writers. Maybe they also have to redefine, refine and narrow their niches to make sure they can cement their marketshare.
Maybe only time will tell . . .