Ask HN: What's the problem with Hollywood?

I see a lot of posts discuss ideas to replace Hollywood in the wake of the successful defeat of SOPA. I was watching Moneyball today and Brad Pitt's character repeated a question that I heard often in consulting: "What's the problem?" Identifying the real problems that Hollywood currently solves is a fist step in creating disruptive innovation. It may help to recognize that the capability we are focusing on is Entertainment or "our ability to tell stories and entertain ourselves". The entertainment capability transformed from telling stories, to the written form, to plays; and, ultimately, television and the silver screen. The entertainment capability has an existing value chain or process by which inputs are transformed into outputs. I would be interested in furthering a discussion that identifies problems and potential solutions.