With 25 million readers, the Chinese website Shanda Literature handles about 90 percent of that country's booming online literary readership, earning around $15 million a year for online with three websites that feature online novels.

This company can teach American publishers--they started out free, but now work on a subscription model. Time Magazine studied this fascinating market for new media readers.

Here's one potential future for digital books: "[Subscribers] can access up to 75% of a book for free and pay only about 0.04 yuan (less than one cent) per 1,000 words for the rest of the book. In other words, it costs about one-tenth of the paperback price to read a book online. Right now, the company takes half of the readers' payment, and the other half goes into the writers' pocket." (Via FiledBy)