I wrote a while back about the "collapsing" film industry, and what can be done about it. But I didn't really go into the alternatives that would keep such a doomsday from occurring:
The New Media.
Everybody loves YouTube and Hulu, even if almost all of the content on the former is pure, unfiltered junk. The questions here involve what sort of revenue system is viable, and when truly great content is available.
Let's face it-- there's been no Birth of the Nation to send online media into the stratosphere. Of course there are the viral videos, but they don't have that blockbustery attribute of making most people want to re-watch them.
Nor are they exactly raking in the dollars.
New media takes care of distribution needs, but marketing is still a sort of challenge. Getting blogged about and e-mailed generates good word of mouth, but if some brilliant kid from Wyoming uploads the next Citizen Kane onto YouTube without promotion, it's gonna be a long time before anyone discovers it.
There's also the question of what sort of aesthetic quality users/the audience accepts. The glossy 35mm look is still dominant in the cinema world, but a bargain-basement webcam is fine for vlogs and other ephemeral online video.
I think as time goes on, audiences will be more willing to accept media that defies genre expectations for appearance-- which could allow for popular feature length films to be made on $300 budgets, and 1080/24p video diary entries.
Yay for cross-pollination.