Puzzle Pirates and Alien Hominid are two more recent examples of small-guy low-budget success stories.
To liken it to the movie industry, sure most of the stuff is big-budget killer effects umpteen-zillion dollar salaries for an A-list cast - it's been that way for nearly a century - but then there's always something like Blair Witch, My Big Fat Greek Wedding, Rocky, Reservoir Dogs.. The list of cheap indy films that hit it big goes on and on..
Someone made mention of theatres hurting because of home rentals, and piracy, I just wanted to point out that this is BS. The movie industry has been breaking box office records year after year. They constantly foist this crap on the public so we feel sorry for them and dont say boo about zany laws they lobby for..
I read some doofy article where some hollywood producer (one you've heard of, the name escapes me) was blaming cell phones for lost profits, and actually wants to legislate some sort of de-facto non-disclosure agreement for movie patrons.. His logic is this.. Once upon a time, say 10 years ago, Hollywood could dump some bucks into some stinker of a movie, hype the crap out of it, and make its profit opening weekend, before everyone knew it sucked.. But nowadays, when it opens thursday night, and sucks, people - as their walking out - can be submitting their opinions on webpages, calling or texting their friends to tell them about it.. So the word is out before the 8 o'clock show. The article mentioned "The Hulk" specifically. My answer would be "dont make movies that suck", but what do I know..
Whoah, tangent there.. Anyhow, back to the subject of arcades, I read an article online, somewhat older, that was blaming Sega for putting the nails in the coffin. The argument went like this, in the beginning, every cabinet was basically custom. Nintendo had their way, Midway theirs, Konami another, and so on. Conversions were a ---smurfette---, unless you stayed with the same company (a kit to make DK into DKJR, for example). Then came the JAMMA age, spurred by the industries demand for easier/cheap conversions.
Arcades flourished in the mid-80s, and it was very cost-effective for operators to just replace boards, marquee's and CP's when a game stopped sucking quarters. Cabinets were fairly generic.
I guess it's the same as the "big sims" argument, but Sega went against the grain and really led the charge back into dedicated machines - Daytona, Enduro Racer, etc.. Operators had to drop 5-digits on a whole new rig that took 4 men and a half a day to install.
Honestly, of all the various factors, in the end it was consoles, pure and simple.
I remember as a kid, about once or twice a year a bunch of friends and I would have the big day-trip to the amusement park (Canada's Wonderland, before Paramount bought it and ruined it - tangent), and the highlight of the day - hell the highlight of the summer for me - was when we'd all spend about an hour in their arcade. It always had the newest games, we'd all be talking about it on the car ride up - wondering what new games were out, "i heard theres a new Dragon's Lair!" "I heard there's this game where you can be a godzilla or a wolfman and smash buildings!", etc.. You couldn't recreate the games at home, home ports of the arcades sucked.
Nowadays, home consoles are more powerful than the arcades. The Atomiswave is basically a Dreamcast, in the era of XBox 360..
Also, once was the time you couldn't really recreate the arcade experience at home - now you can't recreate the home experience at the arcade. Arcade's have no real Half Life or Halo or any other multiplayer FPS's, no adventure experiences that take you weeks or months to complete (Final Fantasy, et al), no MMORPG's, no WoW, etc..
And can any of you honestly say that you put 50 cents into one of those Ms Pac/Galaga machines when you can play it at home?
If a "classics" arcade opened near your home, offering say a dozen or so 80's era games, would you go drop 20 in quarters, when you have your mame machine at home that plays the exact same games?
Those machines live at bars now, where drunkenness and boredom grabs the odd quarter..