So what have they done lately?
I think you're proving the point. They're an empty shell of their former greatness and should be put out of their misery to make room for whatever great thing is to come next.
Not even counting foreign films, here are some darn good productions from the past five years:
Midnight in Paris, Hugo, Drive, Warrior, Black Swan, Inception, Inglourious Basterds, Up, Whatever Works, The Limits of Control, The Dark Knight, WALL-E, Gran Torino, The Wrestler, No Country for Old Men, There Will Be Blood, Into the Wild, Ratatouille, The Departed, and The Prestige.
Pixar demonstrates that it's possible to make 10 movies without 5 of them being terrible. If the rest of Hollywood knew what it was doing you would expect the same quality from Sony pictures etc.
PS: Pixar is hardly the first company to fund things internally raise the bar. You can find other studio's that used that model and produced a lot of decent films one after another. It's just that after a while the people running things don't really have a taste for talent and they can't handle the risks.
That is despite the fact that installment movies of James Bond, Star Wars, Toy Story, etc., that year.
Everything seemed great that year. Or perhaps if was also a good year for me, and therefore everything seemed good because of that...
Also, since Taxi Driver by Martin Scorcese was mentioned, take a look at his latest film Hugo. I think you'll agree it's every bit as good as his earlier work.
Will that impact the quality of their titles? Well, their last film was Cars 2... not exactly a high water mark for them by any measure.
Those movies you mentioned were a result of being within/outside Hollywood, not a function of Hollywood's existence.
Films have been made with other forms of investment, production, and distribution. While films like The Godfather came out of the present model, there's nothing that indicates to me that the present model is the only one that works. And, indeed, the production The Godfather in particular is one of the early successes of that model, and after 40 years its not surprising if the cracks are starting to show.
I remember reading about how the RIAA companies engineer their licensing contracts in a way that forces maximum payoffs [1], and I wouldn't be surprised to find those problems in Hollywood as well.
[1]: http://gigaom.com/2011/12/11/why-spotify-can-never-be-profit...
Consider an alternative market: books. Today anyone anywhere can write and sell a book to just about anyone thanks to the Kindle and other electronic book platforms. Borders went belly up and Barnes and Noble might follow. It suddenly appears that publishers serve little purpose. In this scenario publishers are Hollywood.
Movie production has become cheap. Cameras, equipment, software, the costs are going down not up. Hollywood can do nothing about this. There will always be some sort of extremistan $100m+ movies, but that amount of money is not a requirement for a good movie.
Distribution, in high definition, is unlimited with Amazon, Youtube, Netflix, Apple and others. Watching a movie at home on a 65" LCD with a good surround system is often a better experience than going to a theater and watching a poorly focused image from a projector with an underpowered bulb.
The only thing really left is for the talent to look and say, Hollywood has nothing to offer me, with Hollywood I am worse off not better.
This is all inevitable -- but, if you want to speed it up, these players need to make sure the glitz and glamor are on their side. Without it, Hollywood is going to be around for a while.
One thing to think about w/ this whole "crush Hollywood" thing is this: most of your favorite movies (assuming you've got a boner for the New Hollywood period like I do) were a result of an aging, out-of-touch entertainment monopoly making desperate, reactionary moves to save itself. The old system didn't work, the people in charge had no idea how to fix it, so they went crazy taking risks on young directors. FFC, Scorsese, Spielberg, Altman, de Palma, Lucas - all the really top-drawer American filmmakers, honestly - were a result of this period of blind desperation.
There would be no Godfather without Hollywood. No Apocalypse Now. (also no Taxi Driver, no Star Wars, no Indiana Jones, no MASH or Nashville) In the absence of Hollywood, you get movies like Youth Without Youth and Tetro - two wonderful oddities, but you'd be hard pressed to make the case for them against Coppola's early masterpieces.
The beautiful and horrible thing about Hollywood is that it's a system designed to throw huge stacks of cash at storytelling problems. It's fucking absurd, because money has never been capable of solving those kinds of problems - practice and gut instinct are what create good stories. But when strong storytellers are placed in an environment which supplies nearly unlimited resources, totally amazing things happen. Yes, we can all point to Heaven's Gate, New York New York, and Coppola's own One From the Heart, but flops like those are the inevitable flip side of the system I've just described: talented people can abuse unlimited resources just like anybody else.
I guess what I'm saying is: I'd be seriously depressed if Hollywood were to vanish. Yeah, it produces a lot of shit, but its high water marks have never really been replicated by any other mode of production.