Interesting thread! I would like to say, however, that it is one of those prophecies that could be self fulfilling. Diversification is extremely important. When we got into the adult business approximately two years ago we looked at the business plan and decided it would be more beneficial to build a company around "enhancing" the industry rather than becoming another within the list of small guys that don't make it.
We used the adult industry to drive our custom writing programme with a great deal of success. The adult free sites have simply been the vehicle to vertical marketing. Our affiliates are telling us they are making money through our service than they are through their sites even though the income they generate with us is considerably less per deal.
It is a matter of thinking outside the box (F*CK I hate that expression) but following a business plan to the max.
Would I go into this industry now? You bet!
Cheers all
little shyte!
Custom Novel Productions