‘You can take Hollywood for granted like I did,” says a character in F Scott Fitzgerald’s The Last Tycoon. “Or you can dismiss it with the contempt we reserve for what we don’t understand. It can be understood too, but only dimly and in flashes. Not half a dozen men have ever been able to keep the whole equation of pictures in their heads.”

If that was true decades ago, it is truer today. I have yet to find any American grown-up who disagrees with the notion that Hollywood movies today are unprecedentedly bad. But nobody quite understands why.

It has always been true that Hollywood put commerce before art. It has always been true that celebrity often drove casting, and that sex drove celebrity. But none of that glorious sordid American reality produced movies as bad as the ones we now have to endure.

Take the two films that a wonderful actress, Nicole Kidman, has starred in over the past two summers. Last year she appeared in a remake of The Stepford Wives. The original was a campy, creepy 1970s feminist screed. The Kidman version was an artless, humour-free, dumb-as-a-post sitcom with a logic-free plot.

This summer she starred as Samantha in another painful, universally-panned remake, of the cheerful early 1960s sitcom Bewitched. What exactly was an actress of Kidman’s calibre doing anywhere near it? Perhaps the most concise answer is money. The old studio system was geared toward raking in the dollars, but it also kept costs down. Stars were contracted to studios and were unable to leverage up to $20m a movie or a cut of the profits. Expensive visual effects were yet to be invented. The massive Lucas-Spielberg formula for the summer blockbuster — with advertising and marketing budgets to match — was in the future. And so, as the film critic David Thomson points out in his new book The Whole Equation (yes, he cites the Fitzgerald quote in his title), more movies were made.

In its prime Hollywood used to churn out up to 700 a year; now it’s 200 tops. With fewer and far more expensive movies you tend to take fewer risks with any individual one. And so you tend toward bankable celebrities and concepts that will guarantee sales.

A couple of years ago Thomson related the problem in an interview with the journalist Robert Birnbaum: “Someone comes along and says, ‘Look, Tom Cruise is a secret agent. Goes all over the world. Beautiful exotic locations. Lot of very high-tech machinery. Four or five beautiful women. Two or three major supporting actors as villains. Do you like it?’” The script, the storyline, the characters, the photography are almost afterthoughts.

And so you get something like this summer’s War of the Worlds. It’s another remake; its script is risible, the effects are amazing (but no better any more than most state-of-the-art video games), the characters are cartoons, and the acting rarely gets beyond movie-of-the-week quality. The ending was so corny and contrived the audience I saw it with burst out laughing.

And this was Spielberg! We know he’s capable of at least competent film-making. The producers must have known it was dreadful, because they organised an absurd series of advance publicity explosions to create interest. But watching Cruise bounce up and down on Oprah’s sofa declaring his new love for a Hollywood starlet was about as interesting as watching him disappear in the movie into what looked like a giant alien posterior. (The latter, at least, got a cheer when I saw it.) There is a reason why this year Hollywood has seen almost every week’s take decline compared with last year. The audiences are catching on. They know that imaginatively exhausted dreck is now the rule.

Other factors count. As Joseph Epstein observes in the current issue of Commentary, most movies are aimed at niche markets, mainly teenagers and young adults. Intelligent, challenging adult films are no longer the mainstream. The global market also favours easily translatable special effects, crass plots and minimal dialogue.

The best comedy is now on television, and usually in cheap cartoon form — South Park, The Simpsons, (yes, still) and The Family Guy spring to mind. The kind of intelligent middlebrow of Hollywood’s past is now more likely to be found on HBO: Six Feet Under, The Sopranos, Oz, Deadwood, or even the innovative comedy of Curb Your Enthusiasm.

Every now and again something in this genre makes it to the big screen, and when it does critics are so relieved and overjoyed they tend to overhype it. Sideways struck me as a classic example of this. The ecstatic reviews were more about the deluge of dreariness the critics usually have to sit through than the flawed, slow movie itself.

So why don’t the big newspapers and critics simply ignore the big movies and refuse to review them? Aren’t critics in some way supposed to check commercial mediocrity? A few of the old school still do. The New Republic’s Stanley Kauffman simply refuses to review much that Hollywood produces. But The New York Times cannot. Its advertising income is heavily dependent on Hollywood blockbuster hype. And so, day after day you read critics who grew up on Fellini and Scorsese finding new and inventively ironic ways to describe The Fantastic Four.

Money also traps. Stars paid a fortune find it hard to accept modest sums for more interesting work. Recently I found myself watching Robert De Niro and Dustin Hoffman in a film called Meet the Fockers. It was the sequel to the intermittently funny family comedy Meet the Parents. Hotel Rwanda was funnier. But watching Hoffman and De Niro tart themselves out for millions they do not need in a script whose awfulness defied belief was, well, a bummer.

Will it get better? No. Will some great movies still get made? Of course they will. At some point long after they have been distributed you’ll find out which movies they are. And that’s what DVD players were made for.