Sinatra, on stage, in "Pal Joey"
Zita-Jones and Zellweger, fantasizing, in "Chicago"
Liza, on stage, in "Cabaret"
On stage, "Cabaret" was a book musical. But when Bob Fosse filmed it in 1972, all the songs were restricted to the stage of the Kit Kat Club. They were performances. The songs sung off-stage in the play were either eliminated or reconfigured for Liza Minnelli to sing at the club.
Fosse wasn't breaking any new ground. Way back in 1957, director George Sidney and his scenarist Dorothy Kingsley turned the Rodgers and Hart musical,"Pal Joey," into "An Evening with Frank Sinatra." Except for Rita Hayworth's "Bewitched, Bothered and Bewildered" number (which she lip-syncs in a shower), all the songs in "Joey" are performances, sung before an audience. Plus there's one dream sequence. An iconic Broadway show, finally a film, was no longer a book musical.
So, let's get something straight - a film musical isn't a musical unless its characters burst out into song, and not on a stage or some dream.