I agree with your sentiment that there is money to be made from quality, but you're underestimating the unrealized potential of the pornographic industry. The porn industry can't compete with amateurs if it keeps doing what it's always been doing. But that's just because the amateurs make an equivalent product at a lower price.

Most porn sucks (and blows), but one day pornography will be recognized as a proper art form and attract people who actually care about exploring the genre. Yes; porn is used exclusively for masturbation. But it's better to masturbate to a better product.

90% of mainstream pornography consists of dicks going really fast in and out of vaginas, punctuated by some guy blowing his load in the girl's face. It's hard to think of something involving sex that is less exciting and creative than this. The real fun comes from subtle emotional interactions, power play, fantasy and a million other things I haven't thought of. High budgets and production values are worthless if you're only recording cumshots, but there are no reasons deeper than inertia and lack of imagination that this money and power isn't put to better use.

Assuming that parts of the HN crowd, in fact, watches porn: have any of you, for instance, ever seen a believable reenactment of a sexual fantasy? I sure as hell haven't. There is so much that could be done here. Sex is one of our deepest drives. Pornography has the potential to be one of the most profound art forms we have.

Consider what the advertising industry (clothing, underwear, perfume) is doing. They usually get blamed for destroying the woman's role, setting unrealistic expectations for people's looks, etc. But some of the things these guys/gals make actually has some emotional impact, on a sexual level deeper than what I see in most erotica and pornography. Although a randy ad never conveys any meaning or realism, the writing and acting is so much better. Fine art nudes are rarely effective at getting its viewers horny...advertising is. The highbrow crowd is obviously doing something wrong. Shouldn't artists put their effort where the impact is largest?

The porn industry will, happily, never get bailout money from the government. I'm hopeful that some competition will set the commercial porn studios thinking, or at least drag them down far enough that they can be attacked by teams with less financial clout. YouPorn is good for us, because of its equalizing potential.