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I can sense that you will wind up with a variety of different items for this one. I hate to capitulate to money on it, but I think that I have to do so. I find that commercial fiction is motivated by literary merit, but is a realm where finances and money hold a great deal of importance to its construct. For example, when Dan Brown is commissioned to write sequel after sequel, or similar styles of books, I think that it's an example of how commercial fiction is driven by money and literary profit. I recall that this was a very big issue with writers who started off as relative unknowns like Scott Turow, John Grisham, and Michael Crichton and then ended up becoming quite lucrative. The question that emerged was whether writing book after book after signing a ten book deal with a publishing company represented an exercise in literary inventiveness or commercial success. I see literary fiction as attempting to reach a higher caliber of audience and style. I see it as consciously understanding its potential place in the canon of literary thought and being less motivated by profit as much as contribution to the literary exercise. In no way would I begrudge either. Both have places and functions in what it means to read and be literate. Yet, I would say that the presence of money and "bankable appeal" helps to create points of differentiation between the two.
The main difference between these types of fiction is in their mass appeal and accessibility. Literary fiction tends to be very symbolic, thick, poetic, and focus more on themes, the actual writing itself, and on making points about human behavior, life and living. It is sometimes, as a result, harder to understand, and maybe even not very entertaining. It is written more for the beauty of language and how language can uniquely express the human condition. The main purpose of literary fiction is not to entertain, but to descriptively present human experiences and make points about them.
Commercial fiction, on the other hand, is out to entertain the masses. Its main purpose is to be enjoyable. It usually has fast-paced plots, lots of action, suspense, romance or intrigue, and characters that serve to drive that plot forward. The point is the plot, the excitement, and in getting readers hooked and turning pages. It is all about entertaining as many people as possible. Usually, it is written in simpler, easier-to-understand prose, and keeps the symbolism and profundity to a minimum.
To envision the difference, compare two different types of movies--summer blockbusters vs. independent films. Blockbusters are out to entertain, bring in the big bucks, and usually are pretty shallow and mindless. Indie films, on the other hand, are often abstract and artsy, slow-moving, and out to provoke thought. These comparisons apply to literary vs. commercial fiction also.
I hope that those thoughts helped; good luck!
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