Seriously, its still possible to prosper, if you go quality (content + traffic + name) niche. The "cookie cutter" business model have moved to tubes, but the "handcrafted" business is still in demand as paysites.
Also the United States, Japan, Switzerland, Australia, New Zealand, South Korea, Canada, Mexico, and the EU are currently negotiating
ACTA - Anti-Counterfeiting Trade Agreement which will hit illegal tube sites hard, when it becomes law. Now privacy organisations are going after it, because its being secretly negotiated, and they fear that some of the new rules will hurt privacy, and change the internet (what I have seen there are some very hard hitting sanctions against pirates on the table).
The entire copyright industry is hurting, and politicians will make a new ruleset, which will go after the blatant stealing and distributing of illegal/stolen content. People that think these laws will have zero effect, because the internet is international, only have to remember how spam, meds and gambling was hit. Sure they didn´t remove it, but they made it much more costly/risky business to be in for the entire supply chain, which killed alot of businesses in the process.
Now question is, if you can ride thru the storm or if you will give up before it clears up, and you can spot the coastline of opportunity again (which will probably be too late, becaue the smart ones are already building their business for beyond the illegal tubes, and taking up the beachfront properties
).