I think you are on the money Matthew. I think there is a confluence of technologies and the way people consume media that are making the dedicated stereo or even home theater less and less attractive. 1 - large stereo \ home theaters are NOT considered high tech/ cool any more. There is lots of high tech out there that people want to spend money on outside of just audio video.
My receiver just kicked the can and I am really struggling with the idea of purchasing something that I cant upgrade with a firmware or software update to the latest sound processing technology. The entire receiver/ pre amp processor thing is so irritating to me because I know you can do this with a nice cpu and software without having to change out the entire box when the tech changes. I really think the home audio industry is going to have to change in a big way to stay relevant.
2 - my two young teens couldn't care less about high end audio/video. as long as they can play the content and make their content that's what they are interested in.
3 - Its very rare that we as a family will sit in the same room and watch any one show or movie. We do lots of family things together but sitting in the "theater" is rarely one of them.
4 - my wife likes stuff that I don't and vice versa - many times we go to different rooms to consume media.
5 - I happened to purchase an ultrawide screen for work and my laptop supports Dolby Audio in to headphones. I have a pair of headphones I really like and I have found that watching movies or shows this way is actually incredibly immersive and I tend to use this method of watching far more than my theater now. With that said do believe that my theater gives me a better overall experience but it disturbs everything else in the house when I use it.
6-pop music these days doesn't really beg for high quality systems, the music is so "digitalized" that it doesn't really matter what you play it on. (that's totally my opinion ;-)
I almost forgot to comment on the subject that got me interested in this thread. I specifically purchased my ZTE Axon 7 for Dolby and Atmos capabilities (and several other features). I find that turning Dolby on for just about any music enhances it in a pleasing way. On movies that are Dolby capable you get some amazing sound. I don't watch too much on the Axon 7 but it can be quite startling for people to hear atmos through a phone. Its kinda fun to watch
at any rate, for me its good enough on the Axon 7 to make it a requirement for any new gear I look at.