Films made for moderate budgets have become scarce in cinemas, while very large and very small productions continue. The gap is created by release costs, which do not scale down with production.
Marketing is close to a fixed cost
Reaching a national audience requires a certain volume of advertising regardless of what the film cost to make. Buying attention is priced by the size of the audience, not the size of the production.
A film made for a moderate sum therefore carries a release cost comparable to a much larger one. The proportion of total spend going to marketing is far higher.
That ratio is what makes the category difficult. The film has to earn like a big film while having been made like a small one.
Screens are allocated to films that open loudly
Cinema bookings favour titles expected to fill seats immediately, because a screen showing a modest performer is a screen not showing a large one.
A mid-budget film competing for those slots is squeezed into fewer screens and worse times, which suppresses exactly the opening figure it is judged on.
The judgement then confirms itself, and the next film of that type is booked more cautiously still.
The audience for these films moved
Adult drama, comedy and thrillers, the historic core of the category, are precisely the films people are most willing to watch at home.
Spectacle retains a reason to be seen on a large screen with a crowd. A conversation between two people does not, in most viewers' judgement.
That behaviour is rational and it removes the theatrical revenue the mid-budget film needed to work.
Streaming absorbed the category rather than killing it
These films are still made in quantity, financed and released by services where the release cost is a placement on a home screen rather than a national campaign.
That model suits the economics well, since the marketing problem largely disappears when distribution and promotion are the same surface.
What is lost is the theatrical release, the run, and the shared reception that came with it, rather than the films themselves.
The consequences for careers
The middle of the market was where directors and performers built reputations between small work and large work. Removing the rung changes how careers progress.
The route now runs from very small films directly to very large ones, which is a longer jump and a riskier one for everyone involved.
Studios notice the shortage of people ready to handle scale, which is a downstream effect of a decision made about marketing budgets.