You're assuming that the content has to have the same format as movies. Short videos (like the ones produced by CollegeHumor) can have a good script and quality visuals without involving a big budget. The market isn't "films". It is "entertainment".
CollegeHumour is only really competition for things like Archer, Family Guy and the like. So really only a competition for TV.
There is still a market for Movies, and its a large and thriving market (in the UK movie going is at an all time high.)
You're not going to kill hollywood by stringing together a few gags into a 90minute combo. movie42 is a good example of that.
People want content, and until you can provide content that is on a par, or better than movies, you are pissing in the wind
It wasn't always bad though. We got to see 2001 as part of a focus group in Woodland Hills when they were considering releasing it to theaters. We were lucky there.
Kevin Spacey on this subject: http://www.youtube.com/watch?v=P0ukYf_xvgc.
Longform is largely separate. People rarely gather for a single 20 minute episode of something, they do gather for an 90 minute film.
cinema attendance has been growing for a while.
Not even netflix is killing hollywood at the moment.
Large institutions don't get "killed", they slowly become irrelevant (and the perhaps die), or change to suit the new market in a much diminished role.
if a movie distie has a run of bad movies, it will become insolvent, which means that they'll not have enough cash to progress the movies in its pipeline. (For example MGM went tits up and delayed james bond by years)
Absolute attendance numbers don't mean much. More interesting statistics would be: Hollywood's percentage of the total entertainment market and the earnings (profits after expenses) of the movie industry.
"Not even netflix is killing hollywood at the moment."
Netflix is mostly just a distribution channel for Hollywood. They're showing Hollywood movies and a big chunk of their revenue goes straight to Hollywood. They may be killing local movie theaters, but they're certainly supporting Hollywood.
Major studios own TV networks today. It's all the same bank account. If your money doesn't go into the pocket labeled "Movie," you're putting it in the one called "TV."
A large chunk of TV is owned by {Newscorp, Disney, Time Warner, Comcast, Viacom, and CBS} http://www.freepress.net/ownership/chart
Here is who owns the major movie studios: http://en.wikipedia.org/wiki/Major_film_studio#1990s.E2.80.9.... Notice that with Sony the big exception, the list of companies is roughly the same.
I think that format is in many ways more interesting, as you can develop a story in much more depth than you could with a 2 hour movie.
However you are correct that 8x25 or 6x60 allows for far richer narrative. (The BBC's sherlock is a brilliant example of this 3x90 minutes of tastily thick narrative)