Final answer:
The Classical Hollywood system began to dissolve in the early 1950s primarily due to the rise of television and changing audience tastes, along with the 1948 antitrust case against Paramount Pictures which disrupted the studio system.
Step-by-step explanation:
By the early 1950s, the Classical Hollywood system was in decline for two primary reasons: the rise of television and changes in audience preferences. The television boom post-World War II, with the number of TV households skyrocketing from 4 million in 1950 to over 30 million in 1955, severely impacted film attendance. Furthermore, the groundbreaking United States v. Paramount Pictures, Inc. case of 1948 led to the dismantlement of the traditional studio system due to its violation of antitrust laws, which mandated the separation of film production and exhibition businesses.
Hollywood responded by experimenting with new formats such as CinemaScope and Cinerama and diversifying its content with genres appealing to different demographics, including horror films, music idol movies, and espionage dramas. Nevertheless, government intervention during the Cold War and a growing international influence of American culture, seen in the imposition of screen quotas by various countries, further challenged the industry.