There has been a massive decline in civilization, I find. Kids can't read, write, or even talk properly anymore. I just want to know if you think that this is it for literature. David Foster Wallace hanged himself a few years back, Salinger and Vonnegut are dead and there hasn't been a decent poet since Gregory corso died, do you think writing is dead?
When, exactly, was this golden age when kids could read, write and talk properly? You notice the ones who can't because they use the written word to communicate in a way they wouldn't have done 30 years ago.
Consider a newspaper column from the 19th Century - is it "better written" than something from one of today's broadsheets? No, it's written differently because the standards of how we use English have changed (and that's why "but Jane Austen does it!" is not a justification for how you've written your MS).
As for literature - no, not dead. Never will be. You aren't reading enough if you think it is.
Gilly - I want to address your concerns about computer games. All computer games have an age rating on them - same as with a film. If a game has an 18 certificate, it ISN'T going to be suitable for an 8 year old. It's not supposed to be and parents really need to educate themselves about what the kids are playing and make an informed decision about if they feel it's suitable for their child.
There are many games which are basically playable stories, better in some ways than a novel and they require a high level of reading comprehension in order to play.
As my thirteen year old son and eighteen year old nephew are both currently exploring classic books of the last two hundred years, I'd have to say literature, and the need for it, is very much alive. between them, they read everything from H G Wells to Aldous Huxley. They may be exceptions to the rule, but i don't think so, because they both have friends who read similar books. Both boys have come through the state education system, and have found stories they've loved through school. I believe it's the children who are not encouraged at home that miss out on these joys.
As far as technology is concerned, they both prefer printed books to anything, but they do use facebook and the like to recommend books to each other and their friends.
Civilisation is a fluid thing. It changes constantly. Finding literature through electronic means does not devalue it in any way. As long as people are reading, they will need new stories. It is the responsibility of the author to provide these.
People die; literature lives.