The major problem with arcades in the USA was that they were overly expensive.
Arcades were never really able to convey a price point that made sense for the average consumer. Games were made to be tough, and quarter eaters. Basically, business ate the market. Japan had cutting edge games, and were updated constantly with new cabinets and different variety of genres.
When new systems came out, I'd say right around the playstation era, maybe ps2, arcades died out because the high quality was replaceable with home consoles. Before, the major draw to an arcade was insane graphics and playing other people. Basically, an experience you couldn't get at home.
This is why arcades still are doing ok in japan, because the things they offer aren't available at home.
TBH, the arcade industry has potential for resurgence in the US, but it's unlikely that all the factors would come together to make it work. You need home developers making quality content, cheap cabinets, and a new business model. I don't even think we could get the devs on board. So we'll never pass step one.
