Mark Charan Newton asks on his blog if SF is dying and if fantasy is the way forwards.
The answer? No.
The slightly longer answer: Nope. The death of SF has been proclaimed loudly and in great pitying cries for forty or more years. Lord of the Rings was supposed to have killed off the genre, then later it was Donaldson and Brooks' introduction of the mass-market fantasy category in the late 1970s. SF has also supposedly almost killed itself off as well a few times, whether by the over-reliance on cyberpunk in the 1980s or the slight prevalence of 'quantum' works in the 1990s that didn't really engage the general public's imagination. More recently it is horror and urban fantasy which have been to blame. And SF is still here.
The first point to make is that SF has never done as well sales-wise as the other subgenres of speculative fiction, namely fantasy and horror, certainly not since the rise of those two fields as distinctive sales categories in the 1970s. Dune is the biggest-selling single SF novel of all time, selling 10 million copies since its publication in 1965. Lord of the Rings, which didn't hit the bestseller lists until around the same time, has outsold it by something like twenty times. The number of SF writers capable of hitting the bestseller lists, even in the 'good old days', has always been vanishingly small, and vastly outnumbered by those in fantasy and horror. This has not changed at all. This is of course related to the other point: since the emergency of fantasy and horror as separate fields, the number of authors in those fields and the number of books they write has almost always outstripped those of SF massively. In any given year the number of SF titles published will be a fraction of fantasy and horror, particularly urban fantasy at this time.
SF cannot do much better than it is at the moment for the simple reason that more people aren't writing SF in the first place.
Secondly, the truth of the matter is that British SF is doing very well indeed at the moment. American SF is not doing great, with very few up-and-coming new authors and some of the old guard (most notably Brin and Benford) not publishing new works recently. The feeling with American SF is that it has been conquered by media tie-ins and old-hand authors pumping out - often decent - new works in old series (like Weber and Bujold) rather than writers doing something new. There are some signs of life, like David Louis Edelman's trilogy and John Scalzi keeping the space opera subgenre ticking over, but broadly speaking, American SF is in a worrying state.
British SF on the other hand is doing excellently. We have Alastair Reynolds' new £1 million ($1.6 million at the time) contract and the news his books have recently passed the 1 million sales mark. Dan Abnett, Iain M. Banks and Peter F. Hamilton are all doing even better. Neal Asher, Justina Robson, Stephen Baxter, Richard Morgan, Charlie Stross, M. John Harrison, Paul J. McAuley and Adam Roberts' careers all appear to be in rude health. We have fresh young blood like Jaine Fenn and Gary Gibson who seem to have gotten off to terrific starts. Even new non-British SF authors like Hannu Rajaniemi (whose debut novel is published in 2010) are being eagerly talked-up by their British publishers.
Science fiction is a small field and, frankly, always has been. It's easy to say it's 'dying' just because fantasy and horror are so more noticeably prevalent, but that has always been the case. I haven't seen any evidence that British SF's sales are dropping alarmingly, and British genre publishers seem to still be be picking up new SF works and promoting them, which I would guess would not be the case if it was in freefall. The US field could be in better shape, yes, but hopefully that will come in time once a US publisher takes a chance and starts pushing SF in the same way the likes of Gollancz, Orbit, Tor UK and Voyager have been in Britain (and Pyr and Orbit USA are already making some moves in that direction in the US), at which point I think we will see American SF picking up as well.
Of course, what would be really helpful is if say one of those massive-selling urban fantasy/horror writers were to pen a science fiction novel that did really well. Or if a Pulitzer Prize-winning author wrote, for argument's sake, an alternate history novel. Or if a new, much-lauded author (helped by him being, say, the son of a major thriller writer) wrote an SF novel which was publicised as non-SF and sold really well and then he bigged up the genre in interviews. And of course, that's not getting into those mainstream authors who have openly committed genre and then tried to pretend otherwise (Atwood, James, Winterson), fooling exactly no-one along the way whilst still keeping SF viable.
SF remains a going concern and I think it will be around for a very long time to come.