You would pretty quickly lose any economies of scale if you had to replicate the motor/generator, hoisting mechanism, etc across thousands of lower capacity facilities. The whole idea behind concrete blocks is that the storage medium is common, cheap, and easy to scale up, but that ignores significant other challenges.

Even ignoring the space concerns, and just looking at the cost, it's completely nonviable. For example, the Grand Coulee Dam has been functioning for 80 years, has a 170 meter height, and holds 9 billion kg of water for a (construction) cost of 2 billion dollars (adjusted for inflation). If you compare that to a crane based system a single tower crane can (in optimal circumstances) reach a wide enough area to lift 500,000kg a similar height (I'm being extremely generous with this estimate). That crane will cost you well over 1 million dollars, will only last around 20 years, and you would need about 4000 of these cranes to have the same capacity. Putting this all together means that the cranes will cost 20x more than the hydro solution even if you ignore the much higher maintenance and operational costs. This is also assuming that the cost of 9 billion kg of concrete is negligible (which it isn't), and that you aren't going to need to replace blocks as they get smashed into each other (which you will). Also, the crane solution will have lower efficiency, won't work in high wind, and is utterly stupid for about 50 other more boring reasons.