I'm not convinced free content is the main reason for a decline in sales. Let's face it, nobody has had trouble finding free porn online for over a decade now. Sure there's more of it today, particularly video content, but it was no more difficult for a guy to get something to inspire a free wank in 2000 than it is in 2010.
A guy signs-up to a porn site because it gives him regular access to particular content that appeals to him. However few guys go online with the intention of finding porn to pay for. They go online, see something they like and decide they want more of it. The specificity of whatever they saw on that site that appealed to them determines how likely they are to subscribe.
For example, if a guy goes to, say,
http://www.schokomaus.com and figures he likes latex, he can search around and find lots of free latex content. If he decides he specifically likes the look of Lady Schokomaus in latex, he can probably find something for free, but he'll be much more inclined to subscribe to her site because it's the easiest way to get lots of exactly what he wants right then and on an ongoing basis.
The point is that it doesn't matter how much free stuff is out there because sealing the deal on a sale has always been about guys seeing something very specific in your site that they want more of.