Hollywood is still making money. And if they put less toward cinema releases, avoiding the print/distribution/advertising costs, and do pay-per-view and DVD releases, etc., the only people getting the short end will be the exhibitors. Hollywood will still make money and produce the same biased garbage. They'll just do it more cheaply.
Once I get my widescreen HDTV, a new surround sound system, and HD-DVD's and Blu-Ray's come out, I won't have any use for seeing a movie in the theater.
My guess is Hollywood is making more than ever between:
* domestic box office
* foreign box office
* merchandising
* DVDs
* selling rights for pay-per-view
* selling rights for cable movie channels (HBO, Cinemax, etc)
* and the huge money-maker no one talks about - selling rights to cable & network TV
Hollywood losing money? Not a chance.