Novels are competing for attention with other media that can be peeled off from them. At the same time, novels are social objects and the web is social technology. My novels diffuse through the web in what tends to be a social context. I get new downloads because a bunch of Livejournal people are discussing it. The web makes it easier for people who love books to turn those books into part of their identities. That makes people buy books more. And it’s cheaper to make them, as well as easier to get direct compensation.
So as for the future of the novel – it’s both dying and not dying. You win some new readers, and you lose some.
I feel like this is always true. But most important here to me is this acknowledgment of the novel as a social object. You make it alone, but you do that to connect with people. This is often lost on many would-be writers.