The Japanese arcade scene is huge, yeah, but its also taken a pretty huge hit in recent years. Its still gigantic though, partially because the Japanese will actually put money in the damn machines, as opposed to Americans that say its too expensive (and then waste an assload of cash on the "games" at the local reservation)
There are a lot of theories as to why the scene died in the US, but from what I've seen around where I live (Michigan) most arcades didn't even try. They focus %90 on redemption junk, and then blame their failure on the fact that consoles are so powerful. The arcade in my local mall went three solid years without a new game. Seriously, how did they expect to do well like that? When they very rarely did get a new game, it would be some huge hella expesive thing like Time Crisis 2, which everyone just plays once and walks away. Also, all the fighting games have busted controlers. A joystick is about $7...for a $1300 PCB. There is no excuse. The blue gun was blown out of the Tekken 3 machine. Greenish Tekken 3...for a year! Seriously, fix your shit.
The arcades in Michigan that I know of that are still doing well are the ones with a very heavy focus on fighting games, and beamani. This keeps a heavy emphasis on multiplayer versus play, which brings in the quarters like rain.