It's a bit of a tough question really as you can expect many different answers. Some will say yes its hurting while others are benefitting greatly from the massive potential and reach the free tube sites have.
Big issue (imo) is that for years all went very well and people got lazy. People stopped innovating. Porn used to be this big online innovator, well let me tell you those years are long gone. A lot of people hurt right now are the ones who still do what they did 5 or 10 years ago. Times are changing, the internet is changing and so should you if you run a porn company.
A lot of the porn companies were right there on the right time and were lucky. Now that they need to actually work on their product they have no clue and blame everybody else. Sure it's tough, don't get me wrong but there is still a market out there for a quality product. People are still willing to pay if you offer them something great.
The whole cam issue Jaana is mentioning should not be an issue since cams are about interaction. Take out the interaction and you have just a video clip. The big shift we saw was from people wanting (paying) for paysites to now people looking (and paying) for the live cam experience. It's not for everybody but the good thing about cam shows is that you can not pirate them. You can not pirate an interaction.
For us (FreeOnes) it is also tough to compete with the tube sites. But do you hear me complain? Sure sometimes I do but fuck most of the times I focus on our product and try to make it better. In my opinion is that the only route to go.
Anyways, time to get back to work