I want to make two points:
1 I think Bigkahuna nailed something really important when he said: "Project studios are up ... quality of demos and CDs are down." Yes, we're seeing more people than ever before recording their own music at home, and yes, we're seeing loads of that recorded music sounding like crap compared to what they would get if they hired pro studio time. Is this taking business from the pro studios? Probably, but not much is my guess. Why do I think that? Well, I do my own demos, because I enjoy it, and because I'm learning. But if I was seriously trying to get something on CD that I was planning to wave in the face of the public and the record companies, I think I'd ante up for pro studio time. The pros can get better sound than me. Simple.
2 DVD-audio and video is coming on strong, loads of people are buying DVD players, and it's not going away - I think what we're seeing as we speak is the replacement of the 16/44 CD medium by 24/96 DVD. Pro engineers are excited about it and like it (well, who wouldn't, considering the excellence of its sound?). Now, mixing for surround adds considerably to the amount of gear and knowledge you need to come up with good product. So much so, that despite the unkillable enthusiasm and willingness to experiment on the part of home recordists, I don't see any homers here who are throwing themselves into 5.1. It's too much to bite off when you're still struggling with 2 speakers of stereo. What am I saying? Just this - pro audio's gonna surf into the future on the great big wave of DVD recording. DVD's gonna re-introduce that previous Great Big Divide between pro and home recording.
Some homers will use the skills they picked up with stereo mixing to make the jump to 5.1, but most homers will be content to continue to work with the 16/44 CD. It'll be like the 4-track Tascam days all over again.