Just to clarify by Isekai, I refer to series with any sort of character that is taken to another world be it by dying or being transported or any other method. I do know that other world is not necessarily a new setting as it has featured in classics like Alice in Wonderland but I am referring specifically to the Japanese web novel phenomenon of Isekai. This phenomenon had in particular clear repercussions on the light novels but also the manga and the anime market.
This phenomenon initially started from the site Shousetsuka ni Narou where people published their own stories but soon Isekai stories stood out and became the most read works. More stories in the genre started appearing and they became basically the main genre of the site. Publishers noticed the potential market for this genre and decided to publish in print these once free available web novels, usually the story was had a few changes or another but it was still the same story most of the time.
The light novel market being essentially being like any other market of entertainment it follows trends. At the time it was the trend for school battle harem series like Infinite Stratos and many series authors and publishers obviously pumped out stories within that genre, bearing in mind that the Light Novel market is not as big as manga or anime but it tends to try an appeal anime otaku. The smaller size means that target audience has to a certain extent similar tastes and at the same time it does not allow for a broad variation of the market in particular niches. In manga, you see various niche apart from the general mainstream in the form of magazines like Comic Beam that deal with subject matter and shows things would not necessarily be in the main stream. I am not saying there are not any niche light novels in the market, there are an Novels 0 a label for more adult centric stories is an expansion of exactly that but it fits the scale of light novel market.
This is important because the light novel version of web novels became hits and other publishers followed along to a level that some of the smaller publisher have under their labels mostly Isekai works. Of course, after it would often have various chapters of the story online already and after the publishing deal was complete, the story would be taken down. But since the story often had large parts of it written already, volumes could be published at a faster pace. So not only was it was showing results in sales but a story that was was a popular web novel was also a lot safer investment because it already had an audience, than an original story, so the publishers drifted to it in droves.
In particular, for me this had downgraded the quality of light novels, after all the large amount of interests drove publishers to get deal even for not the top popular stuff. These web novels can also range from good to very poor and I must say a lot of poor stuff has been published. Good stuff has too but there is only a so much and the problem this caused was that it hampered original novels. This is why I believe the LN market has degraded in quality after all it was not only in past that there many classics light novel series from various genres though similar in visual novel, anime like story but there was more variation in terms of what the story was. Isekai has largely destroyed even if it is a broad enough genre to allow for wriggle room in the way the story goes but in the end, the vast majority develops in similarly.
However, how does all this spills over to manga, well Light novels usually receive manga adaptions, a movement probably started by manga publisher and light novel publishers like Kadokawa. Likewise, the popular isekai novels usually also became popular manga and it spread and even smaller publishers that dealt mainly with Light novels are now publishing manga through online services and release tankoubons. It has not effect negatively the manga scene in particular but it is just really a phenomenon that caught on and spread to other mediums albeit similar, manga adaptations of light novels are not necessarily new after all but they seem to me to have reached a new level. One case in particular is the manga adaptation of That Time I got reincarnated as a Slime which was so successful and with the help of the anime managed to figure in top 10 best selling manga series of 2019. This leads to the repercussion this movement had in the anime industry.
Of course, the popularity of these works led to interests in animating them and in natural course of action many isekai anime started popping up recently and with many more still upcoming. Not all of them are successful but there were big hits like Konosuba, Overlord, That Time I got Reincarnated as a Slime and of course this gave a push for other adaptions some of which failed and some that are still yet to air but one thing is for sure the journey these series had from web novels freely available in the internet to light novel, manga and anime is incredible even if it had a negative impact on the light novel industry.
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