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RE: Arcade games and you, a perspective on arcades through time.
I think the arcade culture didn't go away until the mid 90s. I can recall the graphics just weren't good enough yet and the best way to get the coolest looking games was to go to the nearest arcade. Also, some games were just so cool and came out on arcade first such as house of the dead series or killer instinct.
Definitely, the issue was though home console took over the market. Who wanted to pay all this money on someone else's time, when you could hook it up to your own TV and play yourself. That's why the console market became huge in the 90's and we had the good ol' console war.
The game console also kept kids from ditching school as much...lol. I can't tell you how many times I would be at the laundromat not far from the school playing Tekken or one of the other games that is until like you said the consoles got better.
I can only imagine how much money I spent on those things.