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Can an iTunes-style makeover bring the short story to new audiences? Ian Burrell meets the authors and innovators who are selling small tales

The short story, the vehicle that revolutionised magazines at the start of the 20th century, could emerge as the format that radicalises the way that the written word is consumed in the increasingly digital environment we live in 100 years later. In doing so, it could help to save publishing.

A series of new British online initiatives is hoping to do for authors what Steve Jobs and iTunes did for the music industry and establish a culture of making micro-payments for small pieces of content: the short story becomes the single-track download, with prices starting at 99p. The newspaper and magazine industries, as they wrestle with the challenge of monetising their content, should be following this closely.

So many great authors – Charles Dickens, W Somerset Maugham, Edgar Allan Poe, F Scott Fitzgerald – made fortunes from the short story. Eighty years ago, Fitzgerald could command fees of the equivalent of $50,000 today for a magazine piece. Poe, who loved to read his 108-line classic The Raven in New York pubs with the lights turned out, embraced the very modern notion of mastering the art of writing pieces that could be consumed in a single sitting.

The suggestion that literature can change the "everything for free" culture of the download generation might prompt snorts of derision, but, believe me, the short story is in fashion. Events such as Literary Death Match – which is something akin to a hip-hop battle for scribes and takes place under a pizzeria in east London – the Shoreditch House Literary Salon and the Book Club Boutique are making short-form fiction funky.

Clare Hey, a former HarperCollins editor, hopes to capitalise on this energy this month by launching a service which some will see as an iTunes for the written word. The Shortlist Press site will offer downloads of compositions of between 2,500 words and 15,000 words, all retailing for the same price of 99p. "Everyone nowadays is short of money and short of time," she says. "You can read short stories one by one, when you have a moment."

The culture of e-books is at a critical point in Britain and Christmas sales of the new Amazon Kindle are widely expected to be a tipping point. Sales of the iPad and other tablet formats also make the digital consumption of fiction a more attractive pastime. Although most British newspapers continue to provide their journalism for free, and out-of-copyright fiction can be accessed online without charge, the culture of piracy that has beset the music business is not entrenched in literature. Now is the time to set down some rules that work for everyone, says Hey, 31. "I'm keen to offer stories that people can buy affordably, but at the same time send out the message that these stories have a value."

She will launch Shortlist Press with offerings from three authors. Nadifa Mohamed, the author of Black Mamba Boy, has been shortlisted for a string of literary prizes. Laura Dockrill recently published the short-story collection Echoes for HarperCollins. Elizabeth Jenner is a newcomer, spotted by Hey at Literary Death Match.

According to Dockrill, 24, who also mentors schoolchildren in developing writing skills for the charity First Story, there is an appetite among young people for reading literature if it can be consumed on digital devices they are comfortable being seen with. "The reason why iPods have been successful is that you don't have to carry around 12 CDs. Similarly you can have a whole bank of short stories by different authors," she says. Dockrill, who has provided Shortlist Press with a love story called Topple, said the 99p download charge was "about the price of a Kit Kat Chunky".

Hey says she will offer her products through Amazon and hopes to maintain the same 99p price, even though her margins will be reduced. "You have to be in the place where the most people are, and even a minimal amount from an extra sale is better than nothing," she says, pragmatically.

Another young entrepreneur, Ed Caldecott, 25, is promoting digital sales of short stories in audio form. He came up with the idea for Spoken Ink after writing a collection of short stories while studying at Bristol University and then trying to get it published. He was advised that there was no viable market for short-story collections, particularly those by unknown authors.

"It got me thinking about short stories and why no one buys them any more," he says. "Collections are not a great way to sell short stories; that's not how they're written and that's not really how they are meant to be consumed."

Caldecott studied the history of the genre and its success, until half a century ago, within magazines. "In 1950, John Updike said he could support his family on the publication of six short stories a year; obviously you couldn't do that now," he says. "I suddenly thought that the MP3 player, the iPod, the mobile phone, is the new magazine – it's what everyone does when they are on the train – and I thought that would be the new format and a way of resurrecting the short story."

Like Hey, Caldecott believes there is a "renaissance" in short-story writing. He cites the excitement around the BBC National Short Story Award, which is being announced tonight, and the Sunday Times Short Story Award, which is worth £30,000. All five of the shortlisted BBC National Short Story titles will be available as downloads from iTunes or from Monday 6 December.

In another initiative, Nick Hornby has founded the Ministry of Stories, which provides a workshop and space for young writers at the back of a shop in Hoxton, east London. The project, which also has the backing of Roddy Doyle and Zadie Smith, was inspired by a San Francisco scheme set up by American writer Dave Eggers.

Caldecott says the interest in short stories is also being driven by the popularity of creative-writing courses. On Spoken Ink he offers 400 pieces of audio, some fiction and some non-fiction. Authors receive royalties but the lack of rights payments and fat advances means prices are competitive, starting at 99p and going up to £6.60. Established authors include Roald Dahl and Michèle Roberts. Stories are sometimes voiced by famous actors, such as Timothy West and Prunella Scales.

The site encourages users to send short stories or poems as gifts. "You can buy a poem for 50p or a story for two quid and send it to a friend," Caldecott says. "We do non-fiction as well, from hobbies to history to sport." War poetry sold well on Remembrance Sunday and he expects strong demand for love poems next St Valentine's Day.

Spoken Ink, which Caldecott runs with business partner Constantine Gregory, also sells material from the BBC's audio book catalogue, breaking down lengthy works into short downloads. "Some people have the perception that audio books are for the elderly and the blind but actually, they are really fun and it's an intensely rich experience," says Caldecott, who admits he once saw the format as not being for him.

Taking short stories out of the package of a collection and offering them as downloads is a great opportunity for authors to make money. "I think people are more prepared to pay for it and I don't think piracy is so much of a problem. It's making audio books cool, that's the challenge," he says.

The advent of cutting-edge literary nights and the development of devices, including the latest Kindle, will help with that process. The only section of the publishing world not to have recognised the opportunity may be within the industry itself. "Sometimes, you talk to agents and publishers and they haven't come round to it," Caldecott says. "But the digitisation of literature is good for us and for publishing. I almost think it is inevitable now."

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