I think your Jaws statement is fairly accurate. I think part (and this is only part of the explanation, far from the complete answer) of the explanation results from the insane box office profit that came from Jaws and other blockbusters that followed. After 1975, Hollywood started really getting sucked into the notion of making movies that could appeal to everybody and make tons of money. This is not to suggest that studios before 1975 were not out to make money, but they didn't realize how high the gross ceiling was.

Despite their loyal following and their cultural impact, Westerns were never really cash cows. Looking at the top 5 grossing films for each year from 1939 through 1975, only 10 westerns managed to make the cut.

Jeremiah John (5th) - 1972
Butch Cassidy & The Sundance Kid (1) - 1969
Bonnie & Clyde (4th) - 1967
The Alamo (5th) - 1960
Shane (4th) - 1953
Red River (2nd) - 1948
Duel In The Sun (3rd) - 1946
The Outlaw (3rd) - 1943
Santa Fe Trail (5th) - 1940
Jesse James (4th) - 1939

Westerns were solid investments, but they weren't cash cows. After Jaws established what a blockbuster could do, Hollywood had stars in their eyes.

Jaws in 75 (282 Mil)
Star Wars in 77 (421 Mil)
Grease in 78 (209 Mil)
Empire Strikes Back in 80 (308 Mil)
Raiders of the Lost Arc in 81 (252 Mil)
E.T. in 82 (498 Mil)
Return of the Jedi in 83 (366 Mil)
Ghostbusters in 84 (283 Mil)
Indiana Jones & the Temple of Doom, Beverly Hills Cop, Back to The Future, etc....

This changed the complexion of the studio system. Big stars were funneled into movies with big potential. Westerns became fringe films and were seen as the films of your father. Couldn't appeal to the youth anymore, so Hollywood went with fresh ideas. This worked really well through the mid-90s, but then they got too deep into it and now you have the current situation where everything swings for the fences and busts.

I think another aspect has to do with the way the social landscape changed after Vietnam. But that's a whole other post.