Thousands of writers who use online literature networks like teen-friendly Movellas or Penguin's Book Country, are already receiving instant feedback, altering texts on a whim and having their work read by the public no matter what a publisher thinks.

The internet has torn down the walled gardens of a previously closed industry as anyone can publish their texts with a few clicks -- a change which is also creating demand for industry newcomers.

"Publishers don't want the same to happen to them that happened to the music industry," said Per Larsen, chief executive of Danish online startup Movellas. "They know the publishing business model has been broken."

The recording industry has seen an explosion in online piracy take an enormous amount of money out of their pockets with the widespread illegal downloading of music, which used to be available only on CDs, tapes, records, etc...

At the same time, the music industry is also seeing some bands recording their own music and putting it out directly over the Internet, cutting out the big labels in the middle.

Movellas aims to stand out among rivals with its global approach and focus on teenagers who are entering the world of creative writing through its network.

"We want to be the Number One community in the world for identifying new talent," Larsen said.

Already tens of thousands of texts are published monthly on the site by young writers like Ebonie Mather, a 19-year old from Hertfordshire in Britain, who has published mostly poems on the site.

"I'd love to be a writer," she said, adding that the constructive feedback was helping her to develop.

Feedback is also a crucial part of self-publishing service Book Country, which global publishing firm Penguin set up last year to help it tap into the new talent online.

"This gives us the way to cast the net wider," said Molly Barton, global digital director at Penguin.

In January The Berkley Publishing Group, part of Penguin, signed a two book deal with Kerry Schafer, a mental health specialist in the United States, after the editor read her texts on the site.

STANDING OUT

Movellas used Asian success stories to build up the service which is so far available in English and Danish, online and for Apple devices.

Its Chinese peer Cloudary Corp, online literature unit of Internet firm Shanda Interactive, has filed with U.S. regulators for an IPO of about $200 million.

Cloudary had 2011 revenues of $111 million from 70 million monthly visitors and 5.8 million literary works in its archive.

"The Cloudary guys built their business on the Chinese market: it's a big market, but still has its limits. This could be much bigger," Movellas CEO Larsen said.

"Our plan is to find talent and commercialize this talent like Cloudary... I actually think we are months away from selecting the first author who will be offered to be published in print," Larsen said.

"There is no rush from our side, we prefer to build a big community first and do a great job in creating the best possible site for them to enjoy what they do," he said.

Movellas has an interesting concept and an attractive market niche, said analysts, but they raised questions over revenues -- which are missing so far.

"The big question is whether Movellas can find a business model, or get enough users and writers to become interesting for Amazon, Google or a big publisher to buy them," said John Strand, founder of consultancy Strand Consult.

Charlotte Gundersen, who teaches 14-year olds at Hanssted school in Copenhagen, said using Movellas has made writing classes more interesting. She has used it for collaborative writing and for pupils to share their work with each other.

"They are very keen on it. They really like the sharing part of it," she said.

While finding a business model could be a challenge for Movellas, CEO Larsen is not worried about youth focusing on writing on Facebook instead of Movellas.

"On Facebook the content has a lifespan of minutes, at best days, but a lot of stories will be great stories also in 30 or 40 years," he said.

(Reporting By Tarmo Virki, editing by Paul Casciato)

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