I guess I might have something to say on the subject
After all my diploma theses was graded with the highest possible mark and I did cover the conversion of a book into a movie (OK it was Clockwork Orange, so it's really an exceptional movie - and the book was always somewhat obscure - but still).
First off, we should all know what ART is. The most simple and still valid explenation I could ever find was that "art is way of creating something without the intent of having material gain from it."
All the books, movies, paintings, songs... that were made for the INDUSTRY are not really ART. They are products. They may be of extremely high quality, but they're still not art. On the other hand art may be really crappy and people will completely forget about it.
Example - when a kid takes four color spray cans and makes some graffitti (expressing something) that is art. It may be the lowest and most worthless form of art, but it's art. While on the other hand when a graffitti artist is hired to paint a subway station that is NOT ART, but a product. True, such products may be much better then art things (after all Michellangelo's ceiling in the Chapel was ordered, so de-facto it is not art) and so people come to think of them as art (especially if they're done by authors, who have established themselves as artists).
But all of this still has nothing to do with imagination (those were just random thoughts that went through my head while reading some previous posts).
Now about imagination...
No, imagination is not on the downfall. People have more and more imagination, but as chumloofah said, people with a lot of imagination were always rare. You'll find more people today, that believe in one or another form of imaginary creatures (even if they did only copy it from another source). The point is, they take for granted a world that is not real (for instance, most people know the reality of Star Trek, and although it's far from being real, people know about it - so thinking about it is acctually imagining things and thinking about imaginary). On another level, many people are capable of thinking out conspiracy plots. Those might not be original, but they are their own imagination. So by seeing imaginary things, people can imagine more (the quality and originality of it may be questionable, but there's still more imagination as there was before).
And about the ability to deliver a message...
I must say, I have to draw from personal experiance as a teacher. I have given quite a few classes the movie Pink Floyd: The Wall to watch in order to write an essay about it. It's a very hard movie to watch. Most of them didn't think they understood the movie.
the problem was simple, they got several messages and couldn't (because they were unable to process them all) believe that more then one message could be correct. So they were so unsure in what they understood, they disliked the movie. Not to mention, they missed out on several messages (it's a really heavy movie). Now if this causes the public to stop enjoying something, because they can't get a clear message from it, the industry won't make it. Which movies and books were always mostly spread? The ones, that had a clear and easily understandable message, so the reader, viewer got the feeling of catarse (cleansing). And when a book or a movie is that specific then you don't need any imagination.
The problem is also, that the audience is getting younger and younger. The older audience isn't prepared to spend so much money on the industry. An adult with a job will not have the time, nor will he be willing to spend money to go to the cinema 8 times a month or to buy a book every week. Both time and money are factors. And it's the adolescent audience that has the time and can get just enough money for it. now if the audience isn't spending money, the industry isn't making it and therefore the industry won't do something that will not attract the population they can make most money off. And in order to get their attention they have to give the kids what they want. Lots of meaningless action, assotiations to sex and shallowly presented ideas, so they can be certain about what the message was (it was always like that).
The only difference why you might get the idea that it used to be different in the past is that only the quality prevailed. Take a look at how many short TV comedies there were in the seventies and eighties (google for them and you'll see there were many and most of them were mindless). But only a handfull of the best remained (example M*A*S*H). Quality remains, the rest falls into oblivion. But there were always bad quality things. Doesn't matter what media (canvas, paper, film, computer programme...).