In Response:

I was responding to a comment in regards to a post yesterday and I figured I might as well post it for all to see:

Excerpted from the inciting post:
There are too many movies being released these days. It seems every weekend there are 4,5,6 new movies...this week we saw the wide release of Bobby, Deja Vu, Deck the Halls, The Fountain, Tenacious D, and For Your Consideration...This..has contributed to mass amounts of DVD sales/rentals; it's not that people don't want to go to theater, it's that the movies are in and out so quick there's no chance if you don't go in the first 2 or 3 weekends.

The comment incited:
arent their so many more movies becaue there are so many more niches. like borat is for one crowd, bobby is for another. No longer are film studios trying to make movies for everyone its niche marketing. In order to maximize profits they realease movies for short time in theater to get the die hards and the recoup the rest in DVD sales.

And now, the rebuttal:
The studios don't make much money on theatrical runs unless a film is a mainstream hit so they need movies that appeal to as wide a base as possible. And they don't make as much on DVD's if a film isn't a hit in theaters (or at least pushed by strong word of mouth a la Fight Club and The Boondock Saints). If they don't make it in the theater, odds are it won't play on DVD either. I don't imagine there will be too many people rushing out to rent/buy DVD's of You, Me, and Dupree, The Ant Bully, or even Snakes on a Plane this winter.

Besides, the studios don't really decide what plays in theaters, the theaters do. If it's playing well, they will keep renting the print, if it bombs, they'll try to get something else. Theater owners (at least outside of LA and NY) tend to only rent the prints for the films that are most broadly marketed, which is why in Fresno we won't get to see Half Nelson, Last King of Scotland, we got Marie Antoinette and The Queen on 1 screen out 50+ in the city for 3 weeks each, etc. The individual theater owner needs to make a profit, independent of the studios, and since they make the majority of their profits off concession sales anyway, they need as many people as possible in theaters, eschewing as many niche films as possible in favor of the next Denzel/Tom Hanks/Julia Roberts/Will Smith movie, because those actors appeal beyond any niche.

Of course, there is no way for them to know what is going to appeal. Who would've guessed Titanic would be the highest grossing movie of all-time? Who would've guessed Brokeback Mountain would've played so well in Montana, Idaho, and the Dakotas? Fox didn't expect Borat to be a hit, so they cut the number of theaters it released in from over 2000 down to about 800 in the first weekend; it killed and still opened #1. Someone over the summer expected "My Super ex-Girlfirend" to make more than $20mil return (less the cost of prints and advertising) on a $100+million investment. So the studios/theaters don't know, it's all guesswork.

Also, at least 2 major studios announced they are cutting back their production slate for the coming years from 18 to 15 or 12, so the studios are clearly seeing some downside to the film bonanza as well.