There are lots of folks to whom Kuta Legian is the heart of Bali and many who frequent this forum see things that way. To them it's impossible the island could possibly prosper while familiar streets, shops, restaurants and bars are deserted. Their very natural reaction to such personally counter intuitive data is that somebody is lying. Well actually the data in question is almost impossible to fudge without getting caught out in embarrassing statistical inconsistencies. Nonetheless it's worthwhile to ruminate on the background of such strongly held opinions and the probable future of the Kuta area.
When visiting from the early 90s onward the stark separation between the various resort center tourist tribes was striking. For business reasons my crew were staying for 2 weeks each year at Nusa Dua and rarely ventured out other than for conducted day tours to sightseeing and cultural places. Kuta Legian was never on the agenda and it was only on our 6th visit that my wife and I broke away from the group and visited there out of curiosity. It was certainly very different.
The point of this is that many thousands of people at any time were staying in the Nusa Dua resorts and had little awareness and/or zero contact with Kuta Legian - and of course vice versa. We later realized the same, almost "never the twain shall meet", separation applied to Ubud's and probably most of the Sanur guest populations. Even later again staying for a couple of years at private homes in Seminyak we found ourselves somewhat unique in regularly dining out in Kuta; most people we met didn't go beyond the Bintang supermarket. Some of that was snobbishness for sure but in the main it was just complete disinterest.
Those regular visitors whose interest lies in Kuta Legian would certainly regard the area's vibrant, boisterously unsophisticated night and street life as a seemingly infallible barometer of the island's travel industry. This was however always misleading as the larger but less visible population of visitors stayed elsewhere. They also found their holiday pleasure differently and less visibly.
What's at play in the current visitor data is simply very strong growth in well developed non Kuta area markets. Desolate inbound numbers from Australia however are perfectly consistent with a very quiet old Kuta scene. The folks who used to play there have gone elsewhere.
IMHO it's doubtful Kuta will ever return to the old days as the powers that be almost certainly don't want that to happen. A pre-bombs widely published speech by Bali's then governor stated that the travel industry needed to go upmarket. He strongly implied that the Kuta area and it's budget travelers were incompatible with this. There is no reason to believe that view has changed with incumbents but rather is widely shared in the government.
Again IMHO, the authorities can be counted on to let Kuta wither on the vine until awareness dawns on the local landowners and Banjars that while they stagnate other areas are prospering. Eventually some major redevelopment will take place and the dear old narrow streets and alleys will likely give way to broad boulevards, Luxury label shopping boutiques, upmarket villa hotels, continental super delis and a generally ersatz Bali ambiance. It's a shame as the old place was such a nice contrast to the sheer blandness of Nusa Dua.