Who should be grateful? Programs or webmasters?

[Matt 26z]

What do affiliates do that makes their value added greater than their cost?

Affiliates have value because a paysite could never expand their own marketing efforts to such a level that affiliates are just sending the same joins the paysite would have gotten on it's own anyway.

As for who has the upper hand in the sponsor affiliate relationship, I think that depends on what type of sponsor we are talking about. Some paysites are a small part of a much larger empire that revolves around affiliate marketing. On the far other end paysites exist to be paysites that just so happen to have an affiliate program with a few crappy banners as promo tools. Somewhere in the middle of those two is where you find the top tier paysites in each niche, and everyone involved just wants to make money with each other.

Will program owners continue to move away from the affiliate model and focus on paid advertising?

I wouldn't equate an expansion of self marketing to dumping affiliates. It's probably the other way around actually. There are so many sponsor programs and paysites being launched and only so much affiliate traffic to go around. It doesn't surprise me that sponsors are becoming more involved in selling themselves.