Going to the theater is neither a necessity nor is it the only form of entertainment available. As such, nothing forces people to go there so even if there was only a single film studio the quality of films would still matter.
My wife and I just returned home from two years working in a large university town (Urbana/Champaign) and one of the things we really enjoyed was having an IMAX theater nearby. We went very frequently. When we returned to our home in the mountains of Central Arizona, we stopped going out to the movies - our local theater is OK, but not the IMAX experience.
The amount of at home entertainment with HBO, Amazon Prime, CBS Streaming (for Star Trek), and Netflix is phenonimal. I am fine with paying for services and just experiencing a wide sampling. It does take some self control to be willing to stop watching series after sampling some episodes.
My dad has been a once or twice a week movie goer since I can remember, sometimes with my mom sometimes without. But since I bought him a 49" Roku TV, he goes to the movie a lot less often. He has Netflix, Amazon Prime Video, access to my Plex Server, Crackle and the Roku Channel. He would have access to a lot more if the other network provided apps didn't keep forgetting his cable login and force him to validate by going to a website.
The substitutability of going to the theater is not super high if for instance you are busy parents in a small town and you want to have a date night, or get your kids out of the house for a few hours on the weekend.
People might still go because the theater experience is convenient, even when the content produced by the studios is crap. Happens all the time.
