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I think this explanation is incomplete. There were still plenty of mid-size movies after the DVD era that still had profitable theatrical releases. The prototypical example to me is Baby Driver.

Pre-Covid there was simply not enough major weekends to release a big movie. They end up competing with each other.

Sure, Baby Driver made $300m on a $40m budget. But for pure profit maximization you are better off making a billion dollars on a $500m budget.

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>Sure, Baby Driver made $300m on a $40m budget. But for pure profit maximization you are better off making a billion dollars on a $500m budget.

Lol no you're not. $1B off a 500M production budget would be a disaster bordering on a flop. You've not taking marketing into account. You've not taking having to split earnings with theaters into account. Baby Driver is the more desired outcome 10/10.

But if you make 10 $40m movies and 2 of them make $300m you've spent less for more revenue and a lot more profit, and that's assuming the other 8 make exactly $0

But again, there are a limited number of money-making weekends in a year, and you're competing with other movies those weekends.

If you have only 4-5 good chances to make money in a year, you're going to maximize revenue over profitability.

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