Not everybody who makes films is going into hollywood (uggh!)!
16mm is very useful for documentary work, experimental, and small
independents.  An example of this would be "Stranger than Paradise", directed
by Jim Jarmusch(?).  Bergman also used 16mm in his later films.  16mm is
also useful for teaching purposes.  They are very similar to 35mm cameras in
many respects.  Even if they aren't that similar, they allow the student to
learn concepts such as expousure, camera maintenance, mag. loading, how
to handle different parts of a camera, etc...
16mm offers a less expensive alternative to 35mm.  16mm is essential to
any film production student today.
eyes