On two separate occasions, I've been in conversations with people interested in writing who suggested self-publishing a novel a chapter at a time as a way to make money quickly rather than try to sell it to a publisher. I remember thinking initially that this was a bad idea, but not really being able to articulate why. After some thinking, I found my articulations.
Nobody Wants to Read Text-Only Serialized Content
There are serialized content entertainment media out there, don't get me wrong. They consist of comic books, web-comics, web-series, and some television dramas. What do these have in common? They're all more-or-less fixed-length, they all have a substantial visual component, they all require a heavy investiture of time and effort to produce, and they're all designed in such a way that you can pick up anywhere. Books do none-of-the-above. Books don't have a "previously on" intro. Books are meant to be read from the beginning, and they have had such lasting appeal because you can use a book to tell a fantastical story for very little outlay. Consider the audience for books. Who really wants to wait a week or more to read the next chapter? Who really wants to start a book in the middle? How do you accommodate a reader like that? I don't want to make it sound like there have never been serialized novels, because that's simply untrue. Great Expectations was originally published as a weekly serial in a popular literary journal. How many people do you know with subscriptions to literary journals? How many magazines that publish fiction do you read? There's just no audience for it.
Writing a Serial Novel is Actually Harder Than Writing a Normal One
...at least if you care about quality. You can churn out pulp week after week, I suppose. You'd basically have to, because serialization forces you into constraints. You can't edit anything that you've previously published. Your chapters have to be a consistent length and should end with some kind of cliffhanger so the reader is clamoring for the next chapter. Since we're talking self-publication, you're going to be publishing digitally, which limits your readership. And as an avid ebook consumer, I can honestly say that nothing sounds like more of a hassle than trying to read an ebook via a subscription model.
Self-Publishing is a Poor Business Model If You Don't Write Web-Comics
First let's talk about the exceptions. The two that come to my mind are Scott Sigler (fiction) and Jonathan Coulton (music). Sigler offered his novels as a serialized audiobook for free via podcast. And if I remember correctly, he signed with a publisher as soon as he could. He started doing this before everybody-and-their-brother had a podcast, so he was able to capitalize on the wave of a new technology. Coulton offered a song a week for an entire year. He is the exception-that-proves-the-rule for music, but he's a lot more of an exception than people think. First of all, he's ridiculously talented. Second, he was fortunate enough to get his name attached to the breakaway surprise hit video game of 2007. In both of these cases, the creator made a rather large personal investment into the project and produced something with fairly decent production values that they then gave away for free. Neither of them has a particularly huge fan base (Coulton's isn't large, although it's certainly devoted). And those are the exceptional successes. The traditional publishing model gives you things you need: an editor, a marketing budget, a legal department with experience in keeping people from stealing your content, and a filter for consumers. It gets eyes on your product and guarantees a minimum standard of quality to buyers. But even if you could overcome that...
No One is Going to Pay You to Try Out Your Content
There's too much affordable, high-quality entertainment out there for people to fork over money to audition content from an unproven source. And if you're posting it on the web, people expect it to be free by default. And even then, what are the odds of it resonating? What bands do you listen to now that you discovered on MySpace? How often do you troll Amazon searching for something cheap in your favorite genre from an author you've never heard of?
I didn't think so.