It used to be that to create "Hollywood grade" movies would require tons of expensive equipment and capital. I don't see that to be the case anymore. There is powerful software (some even free, e.g., Blender) and hardware (http://www.red.com/) to create high-quality productions at a fraction of the budget.
Having worked at a film studio for a few years, I can say that they are definitely struggling to compete. Mostly because they are slow to adapt to the changing landscape. Slow because they either don't want to change or are too arrogant and feel they don't need to make an effort to change.