Arcades may be alive and well, but living under an assumed name..."Video Slot Machines"
Now here me out before you go all quoting me about "I don't think video slot machines are arcade games". The site
http://www.arcade-history.com lets you build histograms of various types of coin-op entertainment going back to the Gilded Age to today. You can look at by individual video game consoles, or all video game consoles, or pachinko machines, or strength testors, or pinball. This is looking at number of models built I believe, not units made or shipped, but one would think they are closely linked.
Its really interesting as I think pinball peaked in the 1970s..nope, that was a second spike, but the biggest was pre-WWII...that was before flippers and tilt! That's interesting. You can look at how redemption games had a boom in the 1990s and 2000s, but seem to be really sagging in the last few years.
If you look at arcade video game you see the Golden Age from 1981 to 1984 with over 300 new models a year, but it does not drop off a cliff. Instead its still pretty solid, with another upswing in 1988, another in 1994, but then it goes down steadily until 2006, and by last year it was down to just 21 new models.

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Now look at slot machines. In 1999, there were 150 models. By 2004, 650! Boom goes the Dynamite. That's better than ever video games were in the 1980 arcades. It goes down but booms again every few years. At this time, slot machines are the most profitable business for casinos. They have advanced considerably in technology. They are still considered coin-ops, but they use swipe cards and bill changers, and you play in 'credits'. "Multiline" machines with 5 video reels (lines being diagonal or other pattern) allow gamblers to win on some lines while losing on others. This sort of system gives the gambler some electronic rewards of winning, even though they lost more money than they bet. Its a bit like the rewards of playing Pac Man, eating some dots and ghosts, but still losing pretty quicly. Slot machine tech now has video slot machines...no mechanical parts, which is essentially a very simple (to play) video game.