NEW YORK (FORTUNE) - For much of their 100-year history, movie theaters were the exclusive venue for Hollywood to exhibit its glittery wares.

Back in 1946, buttressed by the appeal of newsreels, movie theaters sold some four billion tickets in the U.S., at a time when the total population was 141 million. That's 28 movies a year, on average, for each and every American. But in the 1950s television began to gnaw away at movies' stranglehold on entertainment, and by 1973 ticket sales fell to 864 million.

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While attendance has climbed since - to 1.4 billion tickets last year - it still pales in comparison with old times. With the U.S. population now around 300 million, the average American goes to the movies less than five times a year.

The simple fact is that today theaters are less singular than they have ever been. The business is under assault from so many fronts that exhibitors (as theater owners are called) almost don't know whom to shoot back at: home-theater sellers like Best Buy, black-market distributors of pirated films, online movie downloaders, movie studios that spit out cookie-cutter sequels while shortening the wait for DVD releases, and of course endless new forms of digital entertainment, from iPods to YouTube to video games.

While some operators continue to thrive - buoyed by ever-rising ticket prices and profitable concessions - there is no way a smelly, threadbare theater with scratchy sound can survive in this environment.

National Amusements is fighting back with what CEO Shari Redstone calls a Cinema De Lux (or CDL) theater. The 14-screen CDL megaplex in Millbury looks at first glance like any other suburban-mall theater. But starting with the martini bar and moving into the center lobby, where a baby grand piano sits next to a virtual soccer game for kids, you begin to think otherwise.

Along with traditional concessions, there's a mini Ben & Jerry's and a Starbucks. There's a lounge with comfy couches and end tables stacked with newspapers and magazines. A concierge desk assists patrons who need a taxi or help purchasing tickets.

And then there are the theaters themselves. Two are what Redstone calls "director's halls," fitted with Ultra Leather rocking recliners, reserved seating for all performances, live intros before showings, and escorted seating service. In some CDL theaters, liquor may eventually be served screenside.

(This is an excerpt from a story in the May 29 issue of FORTUNE. To read the complete story, click here or go to www.fortune.com.

Reporter associates Corey Hajim, Susan M. Kaufman contributed to this story.