Living rooms are not that big to start with. I don't think you actually asked anyone's opinion on this! :D

Small TVs are not comfortable to watch. No one I know is okay with getting a smaller TV and moving their sofa closer. That sounds ridiculous. If there's any comfort to this capatilistic economy, it is the availability of technology at throw away prices. Most people would rather spend on a TV than save the money.

As for the theatre being obsolete, I do agree with you, atleast to some extent. I think everyone is right here. All factors combined is what makes going to the theatre not worth the effort for most of the movies. It's just another nice thing, not what it used to be.

Also, the generational difference too. I think teen and adolescents have a lot of ways to entertain themselves. The craze for movies isn't the same as it used to be. And we grew old(er). With age, I've grown to be very picky with movies.

37+” isn’t a small TVs. Resolution was an issue in the 90’s but midsized TV’s have been around for a long time.

Also, I see plenty of people use tablets to watch stuff laying on the couch in front of a big screen TV. So viewing distance is plenty relevant.