That's not nearly as true as you think.

In our market, for example, the number of screens has decreased massively. All the theaters with 4-5 screens are long gone. 30 years ago, there used to be 20 of those, nowadays there are but two megaplexes remaining downtown, with 10-12 screens each (some of which are fairly small rooms).

Yes, they are still packed and popular, but you have to consider they are far less screens in the market, and to be profitable, theaters have often to buy very expensive, ideally located real estate, to invest massively in comfort and to stay technically up to date, and they had to increase the prices astronomically (when I was a kid, it costs 8 dollars on friday, it costs 18$ nowadays. Their cost of doing business are massively higher than they used to be, even in actualized money. There's the same phenomenon outside big cities, where a lot of small town cinemas have closed (there was a time when a good sized village or really small town would have a one or two screen cinema) and all that remain are regional megaplexes. Drive-ins have all but vanished. The total number of screens in the province has severely decreased. As far as I know this is not quite a regional phenomenon, but pretty much reflects what has happened in the same timeframe in the US as well.

There also used to be a time when selling popcorn and fountain soft drinks was enough of an extra income, nowadays to survive most theaters must secure lucrative deals with fast food franchises to meet ends, counters that (at least here) must sell their products for much higher prices than you'd get for the same stuff at their restaurants (a Big Mac is something like twice the price bought at the theater, fountain soft drinks go for 3-4$, they cost barely nothing to make and they're mass-packaged containers). Going to the theater is no longer an activity that nearly everybody do, partly because it's just too expensive. There's an extremely marked loss of popularity in the family market, notably, same for couple with children (tickets+parking+food+babysitter= one hell of an expensive evening. Even if you bring two kids, it's often a 100$ or more evening, not the sort of things many families can afford on a regular basis, the way my middle-class occasionally short on cash for leisure family did all my youth. We rarely missed a week, sometimes some of us went twice or three times!) And contrary to you, I know a lot of people who find the viewing conditions often execrable, because of impolite/disrespectful people, cell phones, and horrid food odors and sounds. Personally I stopped going to theaters regularly the day they started allowing tacos and MacDonald and what not in the screening rooms. Crunch, crunch, crunch, chatter, chatter, chatter, cell phone, chatter, chatter, chatter, some bloody idiot who opens his phone to text in the middle of the movie, and all these odors. Jeez, it's the modern version of the "unwashed masses". Most time I go to the theater now it's for art-house movies, at facilities where no food is allowed and you can expect a respectful audience of silent cinephiles, and commercial cinema I watch mostly from home, not from a tiny laptop, but in good conditions on a big HD screen with good audio, even if occasionally (and it's thanks to lack of availability or too high pricing I don't do it more) when it's streamed from my laptop to the TV. I miss the big screen for some productions (not all, by a long shot), but the rest of the experience not so much!

There is a very loyal group of avid moviegoers that still see a lot of movies in theaters - people like you, cinephiles or lovers of blockbusters alike who stick to the big audience/big screen - yes, but there was a time not so long gone where most people in several age groups went to see movies on a regular basis.... That used to be my parents' idea of an affordable, regular dates or family outing (all our youth it was that). They go strictly to half-priced afternoon showings nowadays, and not nearly as often as before. Theater-going has decreased massively in popularity in the last decades, not only that but it's decreased much faster than other activities, some of which like restaurants have rather seen a huge increase (so it's not just that people are too lazy to leave home, they choose to spend their money on other venues and to watch more cinema from home. Theaters are aware of this. Some chains are even trying a new avenue of "high end"/complete experience cinema. A smaller number of screens than megaplexes, a bit more expensive tickets, with top notch technology and screening conditions, without food allowed in the rooms, and rather than crappy fast food franchises and videogames all around they have cafés, dining room, quiet bars, fancy shops. Their aim is to bring the older moviegoers back to see blockbusters.

Perhaps you're fooled by the fact at some point (10, 15 years ago, I wouldn't know for sure and would have to ask friends/colleagues - IRRC it corresponded a bit to the peak of popularity of video rentals) the decline in attendance reached a kind of plateau and has stabilized. It's got some boost from 3D in recent years, but it had been quite some time since it enjoyed an increase.

As for box office numbers, don't be fooled. As you know I'm sure those numbers are merely revenues and don't tell much about the popularity of movies at the BO. Tickets are massively expensive nowadays, so of course revenues keep increasing. Movies from the time the ticket cost 10 cents, a dollar, five dollars or even 10 dollars have zero chance to keep their high ranking. This is further twisted by the fact the numbers represent revenues, not profits. Not the studios', not the theaters'. US movies are insanely expensive nowadays and often even more money is put into advertising them. The real numbers are the yearly profits made by studios in actualized dollar, that's all. The whole industry isn't going nearly as well as it used to, and the recent US economy has taken a new toll (for working in the field, I know this first hand - big cuts, closed facilities, reduced salaries, early retirements and what not. Hollywood had started more and more to go abroad for part of the processes, either filming or post-production to cut its costs (the movie unions in the US are... special), though the bad dollar has nicked this in the bud quite a bit, at least in Canada. A few years ago, not only the services were much cheaper but the dollar was worth .65 US$, it's been around parity for two years now - not as attractive. This was enough of a concern/problem for California that the state took several measures to discourage the studios from sending business abroad, which worked for a while, though there seems to be an increase again, in part because a lot of producers/directors have developped a taste for working without the conditions imposed by the US unions.). If the BO model comptabilized entries at theaters rather than the money generated, it's not Avatar or even Titanic you'd see at the top of the list of the most popular movies. Not quite. You'd see a few titles from the Golden Age there, and movies from the period before the decline of theaters. Don't forget Hollywood has a lot of losses each year from overproducing, from flops and spend a significant amount of money buying rights or putting in development projects that never see the light of day and generate any profit (which is why it's really the profits of studios, and excluding sales of derivative products, revenues from theme parks as well as revenues from the home market that really gives the real picture of the health of the theater business, and it's not doing as well as you imply it does, not in a great deal of markets worlwide anyway).