2011 represents the lowest theater attendance in 15 years. CBS News has a good report regarding the state of the film industry with regards to attendance at theaters. I think this piece only hints at the problems plaguing Hollywood right now. But if you're new to this topic I think this report is a good overview.
Issues that I think could use more exploration - rise of home theaters, price of tickets, price of concession stand items, quality of movies, and the windowing of content (a corallary to this is the issue of piracy). Overall, it seems that Hollywood's approach is similar to many tech companies - make a bunch of products and you're bound to have 1 or 2 hits. Those 1 or 2 hits float the stinkers. And hopefully the hits are big enough to compensate for all the duds released. But to be fair, PIXAR does break this mold (as does Apple in the tech world...coincidence? I think not).
What if Hollywood execs actually focused on story instead of star power? Or focused on quality over quantity?