I disagree. I feel like a lot of them straight to DVD disney movies they used to do could have been Theatre films.
Classic
They could have, but a direct-to-video movie has less money, resources, and expectations than a feature film does. No one's in danger of losing their jobs if Lion King 2.5 doesn't sell copies. But if that same movie gets put in theaters and has millions of dollars attached to it, it can't underperform. You have product tie-ins, the soundtrack, the advertising budget. And back then, Disney/Pixar weren't making sequels at all unless they really had something worth the effort. Making a direct-to-video movie allows them to cash in on the franchise while not having to risk much. It was easy because they knew they could make those movies on the cheap and get back whatever they spent.
When they started working on Toy Story 2, the animators were in a small studio with limited resources and Pixar was working on A Bug's Life. Once Disney saw the progress being made on it, they decided to put it in theaters, and the Pixar staff was transferred over to Toy Story 2 so they could finish it in time. I think they threw out the original story and started working on a new one, but the schedule was still the same. It takes nine months to a year to make one episode of The Simpsons or Family Guy. The idea that they had to put out an entire movie in that same time frame was insane.
If you look at Toy Story 2, not only does it have better animation and cinematography, you could argue it has better writing and better comedy than the first one. But it could have easily went the other way, been a flop, and they wouldn't have even considered making a third one. Look at all the time they had to make Toy Story 4 and the only thing it has over the first three is the animation.