Okay, so here's what i took from the video linked.

1. Directors are asking practical effects artists to come into a project early, because they are trying to achieve a certain look. The entire production is then designed around this look, the effects are created, lit, filmed, and then someone in the studio is insisting that certain effects then get replaced by a digital creation to achieve completely the opposite look and it makes things look disjointed. The studio themselves are insisting the effect gets paid for twice.

2. When the practical effects guys are called in, they're only being given a three month lead time, when they really need AT LEAST six months. Doctor Who gets a three month pre-production, and it's a t.v. show, and arguably a lot more disposible than a Hollywood movie. Don't get me wrong, i love Doctor Who, but it's a sad day when it looks just as good, if not better than, The Amazing Spider-Man 2.

It does look like practical effects are deliberately being supressed. Obviously the video is biased, but since it's Woodruff and Gillis and they've worked in the industry for as long as I've been alive, I'm gonna give it some credence.

JEDIT Also, I'm gonna say, having looked at some behind the scenes articles and videos, The Hobbit is a really bad example. Yeah, some of us may prefer the physical stuff, but it would seem that Pete just wanted it to look the way it does. In fact, if he had his way he'd replace all the Orcs in the Rings trilogy with CGI, so be thankful THAT hasn't happened.