I’m not familiar with the technology involved.
I think a lot of people prefer to watch in the comfort of their home rather than be surrounded by hordes of strangers that look & speak less and less like them. They can pause it, watch it multiple times, share it, etc. - at a fraction of the cost, and eating whatever they’d like.
Theaters probably still have a small niche with young people, but I wouldn’t think it is large enough for constructing the large multiplexes. I rarely go, but a movie like “Saving Private Ryan” (where it literally sounds like bullets are whizzing past you with the surround-sound) was definitely worth seeing in a theater.
As I say, I don’t go regularly to the movies at all but it seems that tickets are like $15-20 now. You can buy the DVD for that (when it comes out).
I didn’t see World War Z when it came out but there was an option to spend $50 to see it (opening night?) and take it home on DVD (if I heard properly).
Even if tickets are ‘only’ $12, you are still looking at a chunk of change to watch a movie one time (for a couple or a family). And most people own a television and maybe a DVD player, VCR, or computer with youtube.
The multiplexes are a way for theaters to try to appeal to all ticket buyers (so they can sell the concessions that make the theater owners their money). No longer does a theater hope to sell tickets to just one movie for a week or month.