Online racing isn't just less because of accountability. In FPS you'll still get a few kills if you're not that good, in racing games you'll likely not even get to finish the race if you're more than 20 seconds behind the leader. They've also all but abandoned catch up mode to keep races interesting, and the empahisis on upgrading and fine tuning has only widened the gap.

Burnout paradise was actually fun online, not so much for the races, for the co-op challenges. Trackmania has a fun online mode where you race upto 100 live ghosts trying to set the best time in 5 minutes. (Unfortunately with poor map rotation) NFS hot pursuit wasn't bad online, trying to catch the other team. Still far from as fun in local splitscreen in the older versions. Straight up online racing is usually very dull. You wait, you start and hardly see anyone after the first few corners, why bother. The only interactions are people crashing into you from behind.

Budgets for racing games did not keep up with expectations, splitscreen removed, sales fell, a negative reinforcing loop indeed.

Maybe part of audience went to mobile.
I remember horizon chase being sold on ipads. in other ages, only on a console or PCs were possible to play a game like this.

Oh god yes! I remember playing it on PS, one of the most awesome games I ever played! The music was also fantastic.

I tried one version on an emulator last year but it didn't work all that well with my 360 controller.

This reminds me of the RTS genre going through it;s ownd ecline, with studios like EA having bought out Westwood, half went on towards being Petroglyph and the other EA LA (which later got canned after C&C 4). EA Even went on to make Victory studios and merge it with a different Bioware team (not the ME one) to form Bioware Victory, 2-3 years later and those guys got shut down when they couldn't get anywhere with Generals 2.

MS shut down Ensamble studios after Halo Wars. Haven't seen nor heard much of a new AoE happening.

Only big players I see in the genre are those behind Civ, Blizz with SC and Sega with Total War.

For me every development in racing games made the genre less compelling. Removing couch co-op, going open world, and focus on realism all left me bored. I haven't bought a car racing game in seven years (Burnout Paradise) and I doubt I'll own a single one on my PS4 or Vita. If I really want to play one I can dust off the PS2 and play some Burnout with friends like we used to do all the time.

Even though it was only one track, RR had a very fun and challenging progression.  An old school game of mastery.

It used to be that games were small enough that the fun was to re-play and master every second and play perfectly.  As we progressed to games having lots of unique content (e.g. lots of tracks, cars, open worlds, etc.) the idea of endless re-play for fun has naturally dimminished.

True, the focus has shifted from mastering the tracks to mastering the cars. You used to unlock new tracks and new locations as a reward of getting past difficult races. Nowadays all tracks or the whole open world is already available from the start and you only unlock more cars and events.
Games like re-volt were tons of fun in split screen, yet also by yourself to master the tracks. Just like wipeout. Not that much content, yet it feels so good to get in the zone and complete flawless laps, best played with the weapons off. Old Burnout games the same again. Add in hot seat crash mode with custom made scenarios to master >>>>>> whatever the fuck crash mode was in paradise.

Trackmania still delivers some of that old school bliss for learning a track, as well as DriveClub. Most other games have gone with open world or real life tracks that have become stale. Open world racers are fun for a while, yet it quickly becomes a todo list of simple challenges instead of that feeling of knowing a track inside out. No real reason to come back to after you're done upgrading stats.

The old Burnout games didn't even let you finish a track until you got good. You had to earn crossing the finish line. No bouncing cars out of the way, drive perfect or crash. Crazy taxi did that in an openworld setting, which made getting to the other side of the city a reward in itself.

There are many arcade racing games. You should play NFS: Hot Pursuit that was released in 2010 and was made by Criterion. It was amazing and if you enjoyed Burnout: Paradise you will enjoy this one too. Its not open world like Burnout: Paradise.

Gran Turismo sells way more than Forza Horizon and Motorsport. Mario Kart and Gran Turismo are the biggest racing franchises now. Forza Motorsport and Need For Speed come next and Forza Horizon comes after them.

Need For Speed used to be huge and Most Wanted sold over 16 million units. But the series has been handled poorly by EA and recieved titles of variable quality since the seventh generation.

I think most arcade racing game players went over to smartphones due to motion controls which made them simple and easy to paly. That's why sims are popular now as they don't fit well on smartphones. Mario Kart sells because its Mario and its easy to pick up and play and you don't have to be a skilled driver to win.

Is that's all that's left now? Forza, GT (delayed), NFS (free to play mmo) and Mario kart.
I don't see how racing on a phone can be appealing at all, how do you get any sense of speed on a 5" screen. I didn't enjoy wipeout on a handheld either. Do racing games actually sell on smartphones?