Space dictated size.
Now if the rumors are correct and there are multiple shows a night, then it's not a problem. It might actually work for them.
Say 8000-10,000 are sitting at Fantasmic, with the crazy long lines and the forever exit ... Disney is making no money other than some initial concessions and it seems most are not buying. Yes you might have two shows but the lost time before and after the show impact.
Now you have 3 shows a night with 5000 at each (which would not surprise me based the anticipated show). While 5000 are watching, 10,000 will be in the park eating, drinking, shopping and doing some rides. Many will be purchasing dining packages to insure seating since theater is smaller. Also will be much easier to load and unload.
Even with costs to run the show, I will guess their cash flow from folks in the park waiting for their show could far outweigh it ... especially if the theater is mostly dining packages and fastpass ... because standby lines don't spend money.