On the other hand, the first guitar i bought was one of the first cheapo fender copys ever, one of those italian cardboard guitard from the 70's. I bought it of a friend for 20 pounds which was all i could afford at age of 13, then after alot of searching i found a beatup overdrive pedal and i wired up my dads old stereo to play trough. Total cost a mere 25 pounds!
No matter how bad it sounded or that i cut my fingers everytime i played, or even that we could not afford to get me guitar lessons. Probably this has made me much more fanatic and willing to spend money on a good guitar. I still have that bloody B(&^%# of a guitar, going to ritually burn it one day, damn i was happy when i got an Aria for my 16th birthday.
So maybe it wont be all that bad eventually, and i also think since the quality of mayor guitar brands is dropping like crazy, small builers could benefit if they only are able to reach a large enough clientele, because on the net thats what its about i guess.