You put a lot of work into the OP and it's well written but I disagree with most if not all of it.
The part about arcades making money was pretty spot on but console games were often super hard so you couldn't just rent them and beat them in a weekend, as well. Especially in the NES era. When Sonic came out, he was just fast and cool with great graphics. Kinda pushed the limits with every new game (during the 16 bit era, at least). Never felt arcadey to me, though.
And to hide that most of them were 30min long
duduspace11 "Well, since we are estimating costs, Pokemon Red/Blue did cost Nintendo about $50m to make back in 1996"
Mr Puggsly: "Hehe, I said good profit. You said big profit. Frankly, not losing money is what I meant by good. Don't get hung up on semantics"