Abrams’ philosophy is, oddly, a rarity in Hollywood as you rarely see mid-range studio tentpoles anymore. Studios seem more open to losing money on overpriced spectacle like John Carter and Battleship rather than concentrating of less expensive, more practical movies which would more easily turn a profit.
Most interesting of all is a note in the comments about an interview with Robert Rodriguez, who noted that the reason many Hollywood movies have such absurd budgets is because producers are too used to the culture of throwing money at a problem, even a trivial one, to make it go away. A lot of it goes into buying pricey actors as "audience insurance", or front-loading a film with disposable spectacle set-pieces to ensure that butts get into seats.
One of the things I always liked about Hong Kong's and Japan's film industries was how they habitually substituted ingenuity for big budgets. They didn't have a lot of money to throw around, so they found ingenious and creative ways around their problems. This in turn created whole new kinds of moviemaking. Unfortunately, over time, those countries got used to working with bigger budgets, and the culture of money-throwing seems to have infected their cinema as well.
Most audiences don't care if something "looks cheap" as long as it's effective, with that being a contextual thing. You expect a $200 million film like The Avengers to look seamless, but you're not going to complain about the wires holding up a model in a film that came out of someone's garage. If anything, you're going to be all the more enamored of it for that reason.
Another telling statement I read somewhere was that a big budget, to Hollywood, is a sign of their seriousness about a project. If they can say they spent $200 million on a film, that carries more gravitas with their merchandising partners — a significant and growing source of recouping revenue on films — than if they spent $25 million. Audiences pick up on that in turn, although I suspect how seriously they take such things is wildly overblown.
It isn't the big budgets of big-budget movies that are themselves the problem. If $200 million is spent on Inception, The Dark Knight, or The Avengers, that's fine. It's when $200 million is just as easily blown on forgettable dreck that doesn't deserve to sit in the cut-out bins at Wal-Mart — because the machinery that makes the former possible also encourages the latter, and for the same reasons. Both are seen as "investments", with the actual long-term value of the investment in question (what some of us would dare to call artistry, or quality) reduced to an irrelevancy. And that $200 million could buy four $50 million movies that do radically dissimilar things to that one blockbuster, and could still be profitable.
It's not that movies are too expensive. It's that what we're buying for that money is too many of the exact same kinds of movies.
Other Lives Of The Mind