In this modern age, it's fair to say that the arcade machines are pretty much antiqued: It's hard to compete with home consoles which boast DLC and online gaming.
Still, whenever I have the chance, I like to spare the chnage to play the odd game of Virtua Cop 2. Sure I have memorized a lot of areas where/when the baddies show up but it's still loads of fun. I don't mind looking at graphics from the mid-nineties - in fact I actually find a lot of mid-nineties arcade graphics look a lot better than some fifth-generation console games.
Of course arcades may be dead but they are still around in the form of arcade parlors (Galactic Circus in Melbourne's Crown Casino comes to mind) and, in Japan, public places where they generate a decent revenue (train stations being one such example). It does present something that not many games have:
Staying power.
As I mentioned above, I'm still keen to have a shot at Virtua Cop 2. And Daytona USA is still heaps of fun to play with a group of people (8-way game FTW!). Thus, it becomes clear why arcade games persist: If it's a good game, people will continue to play it. This is what Nintendo realized with the virtual console and may also explain why old games are being revamped in HD.
Many of the games I see in my local arcade are pushing fifteen years which is an absurdly long amount of time in an industry where major developments happen in third of that time. Granted, I have seen some innovative things being done to arcade games elsewhere - like Namco & Nintendo joining forces to present Mario Kart as an arcade game - but as said, if a game works well then people will keep playing it until the end of time.
Now there's a thought to ponder: Would we still be playing Starcraft if Blizzard didn't keep pumping out updates for it on a regular basis?
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