DVDs are dead, long live DVDs
While DVD sales are down in general, I think you need to look deeper to see if online sales are up and will make up the difference.
Judging by the gripes of affiliates and paysite owners, they are feeling a decline in sales just as much as the DVD side.
I see the issue that what will be down is the concept of the full-length DVD. The fast-forward button on the VCR, Tivo, YouTube, etc., has proven that consumers' attention span has shrunk.
What I see is the potential for DVD to make a "cum back" by releasing compilation DVDs.
Look at record albums on the BillBoard Top List; for a while it was compilation CDs. The current top 100 list at Billboard has 3 compilation CDs of the top 10.
Look at stores like iTunes that allow people to purchase a single track rather than the whole album.
DVDs are tangible items. You can replay the content over and over again.
With digital video, it's in a streaming or downloadable format.
With streaming video, you watch it one time and can't replay it. Downloadable content is good (as long as it is not locked up by DRM) and can have replay value, but it requires downloading large files and then ultimately burning them to DVD for storage and playback.
If the consumer wants a variety of video as clips rather than a full length feature porn movie.... give it to them. Release a DVD that has the content they want.
Some would argue that shooting gonzo clips will take away from "the art." It's porn; the art is in the quality of the climax.
As video companies move towards internet distribution, don't forget about DVDs. Offer members/consumers of the internet paysite the ability to purchase a DVD, but this time, don't charge $24.95/DVD.
It doesn't cost much to replicate DVDs on-demand. Create compilation versions that are clip based, and have the tangibleness to hold onto the DVD (as well as other things) in hand, rather than just as a bunch of digital files.
A lot of internet-based websites were releasing DVD's this last year and more of them won AVN awards.
How interesting it is to see DVD/video folks look towards the internet, while internet folks are looking towards DVD.
Fight the convergence crossroads!