The dismantling of the Studio System is often credited to the brash young Turks who were unwilling to follow the old rules and wanted to shake up Hollywood. The truth was a bit more complicated than that.
Then as now, the road to stardom is littered with the memories of people who never quite made it. Despite the many shattered dreams of those who never gained the fame of the superstars, Hollywood's moguls were never wanting for new superstar wannabes. Bus loads of fame seeking dreamers streamed into town daily. If a young Turk tried to stir things up, he or she would often find him or herself back waiting tables at Chasen's. It was more than just new blood that took down the Studio System; in fact the biggest factor was rapidly entering American homes- television.
Television didn't just steal Hollywood's audiences; it also forced the movie studios to try to differentiate themselves from their younger rivals. The quieter B films that every major studio produced to keep their operations humming between the major releases were no longer attracting audiences because they could see those sorts of productions at home for free. To combat this, the bigger studios started to produce bigger, more lavish films in CinemaScope and other large formats not available to home audiences. With every movie needing to be a major event, the poverty row studios either had to embrace Sci-Fi gimmicks or try bigger productions. Columbia Pictures made the leap to the big leagues around this time. Other studios faded away. Cleopatra was the nadir of this bigger, better period. Hollywood realized that it couldn't produce only big epic films. It found its salvation in the young Turks and the new letter rating system.
While the movie rating system was supposed to be a valuable tool for parents, the studios saw it as a way to produce small films that were different from television. Content found in PG & R rated films was often banned on television. Hollywood would still rely on big epic filmmaking for part of its production slate; but now it could also produce smaller, less expensive 'today' pictures featuring nudity and adult language. Hollywood's total movie output would never equal what it was in its heyday, but at least it found a financially viable road forward paved by its new generation of auteurs.