This argument can go on for years.
Before I was in the porn business I ran a record label, which is run basically the same way, just with a different commodity. Back then, everyone thought the business was doomed due to mp3's and online music. Shit, alot of people still do think music is doomed because of those things. The truth, however, is that we found out that even if you put mp3's of all your songs on the market for free, people still bought your CD if it was good. The only people who really suffered from having music online was people who could no longer convince the public to buy a collection of 17 songs just because one of them is decent. Now it's becoming more imoportant for artists to make sure the entire collection is good. Basically, there's alot less 'filler' on CD's nowadays.
I think the porn business works the same way. Digital delivery can never replace the benefits and quality of hard DVD product. Not to mention the fact that the VOD crowd and the DVD crowd are really two different demographics. However, if your product sucks, being on the VOD networks will expose that and then could possibly have a determintal effect on your sales, but don't blame the VOD - blame the fact that the product sucks
