25% of US adults, say, spending on audio gear may be a huge market segment, but it's still a minority!
The reason sound systems aren't as popular as they were in the 80s is that most modern TVs come with decent stereo sound, and bluetooth headphones are excellent. People are buying decent amplifiers and speakers, built in to other things because manufacturers know that they will get more sales if they make the built-in audio quality of their devices better.
> People tolerate watching things on small screens without good audio, sure, but that doesn't mean people prefer it.
Their actions indicate their preferences. If they're doing it a certain way then they, by definition, prefer to do it that way. No one is forcing them to do otherwise. Audio equipment is not expensive.
And now they don't. Your comment conflates two things: what people agree is true vs what people do. Everyone knows that decent stereos or audio setups sound better than phone speakers. That isn't up for debate. But they stopped buying decent amplifiers and speakers because music precipitously dropped as a cultural cornerstone with the mainstreaming of the Internet. If you ask someone with headphones on today what they're listening to, it's just as likely to be music as it is to be podcasts, news, youtube videos about video games, or youtube videos about a random topic that you would never think people would care that much about.
> Do you think people wouldn't notice if a cinema replaced their 10.2 surround with a couple of phone speakers?
This is actually a pretty good example. Obviously they would notice. But it turns out that they don't actually care very much: the masses are perfectly happy to watch shows and movies on tiny screens with terrible audio.