Neal Gabler in the LA Times has some theories why the movie magic has gone:

Eighty-three percent of the respondents [to a recent survey for the Motion Picture Association of America] said they were satisfied with the content of the films they saw, but 60% nevertheless expected to spend less of their income on moviegoing in the future, citing dissatisfaction with the moviegoing experience and the emergence of better alternatives for their time and money.

Gabler sees the lives of celebrities taking over from the movie plots of yesteryear as the cultural icebreakers in the national conversation, and movies increasingly as a machine for manufacturing celebrity. Movies have, of course, always powered the star machine, but are now being overshadowed by the celebrity manufacturing sweatshops of reality TV, which are proving cheaper, dirtier and much more productive in this sordid industry. Jennifer Hudson's Oscar win makes her the first to cross the divide from reality celeb to movie star. Who would suggest she will be the last?

However, I disagree with Gabler's hypothesis that first the cult of celebrity, and ultimately the internet-powered cult of the indidividual are doing away with the movies as the centrepiece of popular culture. A far less intellectually seductive culprit suggests itself - the good old TV.

Shows such as 24 and Lost now typically cost more that $1 million dollars an episode to make, and have all the glitz of the movie blockbuster. There has been a brain drain from Hollywood as the best scriptwriters in town follow the money to the TV studios - these are the Paramounts and MGMs of our era. An hour a week in front of the television in exchange for having to watch a fistful of commercials has usurped the increasingly expensive trip to the cinema. DVD sales of films may be falling, but watch the box sets huddle together at the top of the bestsellers lists and you'll see where the modern viewers loyalties are really shifting to.