Agreed, though that tying up of home video rights with a guarantee of theatrical distribution that seems to be the main issue with Japanese companies sounds like it is the major problem.
Rightsholders are often the source of the problem - as we know only too well from their insistence on region-locking Blu-rays even though there's no sign of a release in any of the other regions. And I also remember the cultural problems with dealing with Italian rightsholders in the 1990s who couldn't understand why a colossal blockbuster in Italy would unavoidably be a limited-release arthouse film in the UK, and don't understand why the film can't just be dubbed into English and given a mainstream release. And as a result they wanted far too much money for the rights, and so the films didn't get picked up at all.
I hear Polish rightsholders are equally intransigent, which is why lots of good recent titles only play theatrically in places like Kinoteka - Wajda's Katyn
nearly didn't get a UK release because it was erroneously assumed that its vast success in Poland (caused by specifically local factors that weren't duplicable elsewhere) and its Oscar nomination justified a fee way over the odds. Fortunately, once it became clear that no-one was going to bite at the original asking price, they proved open to negotiation - but the film eventually opened in the UK more than 18 months after its premiere.
Often as not, it comes down to ignorance of how things work in a particular territory, and an assumption that distributors have the power to impose the rightsholder's conditions on exhibitors - whereas in fact if an exhibitor is faced with an unattractive deal, they'll simply turn it down flat. And niche distributors end up getting squeezed in the middle.
To play devil's advocate though, this seems mostly just a city-centric (if not just London) problem other than that - if there were no problem with home video rights then I don't really see the problem with dropping the token theatrical run at a couple of cinemas that are regularly acknowledged as having their own agenda in mostly marketing their own licensed films. Apart from maybe the publicity that would be generated by brief mentions on Kermode's review show or the BBC's Film programme or capsule reviews in papers before they get back to talking about the latest big mainstream release. Sight and Sound's coverage could possibly become erratic though if most of the interesting potential theatrical releases instead skipped that stage and jumped straight to DVD or VOD.
There have been quite a few internal debates about Sight & Sound
's decades-old policy of covering every theatrical release and whether it should still be a matter of general policy, because you're right: lots of theatrical releases are blatant loss leaders (with one particularly cynical example, I was sent the DVD to review as a theatrical release, since it was coming out the following week!) while lots of interesting stuff goes straight to DVD/VOD, and it's not logistically possible to keep tabs on everything worthwhile even if the physical space was available to write about them. Especially since the regular DVD reviewers often make a point of covering interesting international releases as well as the more attractive UK ones. Which is why I think they're sticking with the old formula for now.
Sorry if the above argument is not well put - I'm trying to channel my inner Nothing in his absence!
Possibly not the best role model - Nothing's Achilles heel in these debates was that while he knew a fair amount about the production end he generally knew next to nothing about distribution and exhibition, and was temperamentally disinclined to learn, largely because economic and logistical realities usually conflicted with his various ideological positions.
Incidentally, it's worth keeping tabs on that Twitchfilm article, as the commenters are generally pretty knowledgeable - and include representatives of the exhibitors being dissed.