Characters suddenly bursting into song! Or dancing unabashedly in parks and on sidewalks! Really? Nobody does that in real life.
The form, arguably, had its widest acceptance when filmmaking itself was somewhat artificial. During the Depression and the years immediately following, the films of Shirley Temple and the RKO musicals of Fred Astaire and Ginger Rogers were shot in black-&-white, a format which, by its very nature, divorced the story being told on screen from any hint of reality.
We had black-and-white figures set against black-&-white landscapes and living in homes with black-&-white décor. Not at all like real life.
The black-&-white cinematography made it easier to suspend disbelief and, by extension, to accept all the carefree singing and dancing.
This was "make believe" in the truest sense.
But as movies matured and became technologically advanced, the artificial was replaced by something closer to reality. With the advent of color, the characters on screen were no longer stick figures but real people and everything that surrounded them was less primitive and simplistic. Or seemed so. Audiences began to bring a different perspective to movies.
What was clearly a fantasy now seemed real.
Again, nobody does that in real life.
Of course, this stuff works well on stage precisely because of the stage setting which keeps us always aware of the artifice - of the play-acting.
Die-hard musical fans (count me in) may have orgasms over such moments, and some movie critics and Academy members, too. But you can sense the average moviegoer becoming clenched and pulling away. While the films of “West Side Story” and “The Sound of Music” were both hits, they marked the beginning of the end of the movie musical.
Tellingly, their success didn’t generate more movie musicals, but fewer.