My, my Chris, you definitely hit a good topic here.
The adult industry has changed so much in the last 7-8 years. I remember the good old days when my paysite, BabyGotBack.com, was actually the first true amateur-run website to feature multiple girls. Wow, how I had the corner on the market and didn't even quite realize it! The money rolled in easily and I had no idea how things were to change in the years ahead.
While it has certainly gotten more difficult to make this business profitable (the adult industry in general), I still believe and enjoy my work tremendously. I have, as someone else put it, made sure all my eggs weren't in one basket, however. I still have my membership site, which does respectively well in today's industry environment, but now I also run and am even expanding other sites, including the Certified network of sites (CertifiedAmateurs.com, etc.). I also have plans for some new networks, which I'm not ready to let out of the bag yet.
In addition to adult, I have ventured into some non-adult business, including being a part owner in a travel agency and managing three travel websites for our company.
In five years I look forward to seeing my travel agency grow, as sales are doing well and the industry is simply one that will continue to do well. I also, however, look forward to the work in the adult industry that I do. I believe while some things like the growing availability of free porn, legislative changes and other factors already mentioned in this thread will continue to change our industry, I don't believe it will ever be a dead industry. There are always going to be people (men in general) looking for the type of adult material they like (be it amateur, fetish, etc.) and while sites may come and go, the ones that are managed well -- and managed smart -- will continue to thrive. Gone are the days where hap-hazard web authoring can make a lot of money in this industry, however for those who run their sites well and continue to learn and grow the business will still turn a profit. After all, this is a BUSINESS and anyone who is not treating it as such will have difficulty. Learning and trying new things in marketing, site development and getting to know what the online customers are looking for are really important. I also believe that while there is a lot of free porn out there, many customers don't want the bullshit that comes along with finding that. Thus, there are customers willing to join membership sites, removing the eyesores of ads, popups and other annoying things utilized in free porn sites.
Another thing to consider in the next five years of growth is that things are changing -- mobile porn is emerging, albeit slowly, and other new niche and trends are growing quickly -- like blogging, and even niche blogging. Keeping up with the times is especially important in this industry -- looking toward new trends and not relying solely on what worked "back in the day", when making money in this industry really didn't take a lot of talent or planning.
Keep it fresh, keep looking for new ideas and keep learning... that's the way to continued success in today's adult industry.
Just my .02 for what it's worth!
Kay