Ok Happy, it makes sense what you are saying and i couldn't disagree with your analysis. But then i'm probably interpreting the OP question wrongly. Does the porn industry suffer from free content? I don't think so. Free content is nowdays part of the industry and as such it affects it and its players one way or another; but my understanding was that the OP was asking if the current decline of the industry is caused by free porn; and i think it's not the case.
The industry is suffering from lack of innovation, from a stagnating biz model, from short sighted movers, from obtuse industry representatives, from a ghettoized and masonic attitude which has flattened and disqualified the final product through the years, from auto reference, from disgracefully aggressive affiliate campaigns, but not from free porn: if free porn (and again, we are not talking stolen content here) was so bad, nobody would benefit from it and instead many players benefit from it and many others are totally unaffected by it. Then yes, some players go out of biz because of free porn but that's because they don't have any biz model, plan, assets, idea of how to conduct a biz and today they go out of biz because of free porn, and yet yesterday they couldn't have got into the biz in first place at all without the chance to post some free stuff on tubes and social networks, so they don't fit into the statistics, in my opinion.
So, yeah, i guess it's about semantic and how i have interpreted the OP question.