I probably am too young to know anything about the arcade business, but arcades died because better, more convenient technologies replaced them. Their form factors shifted to consoles, handhelds, and computers.

Consider now the adoption rate of smartphones, where we'll have a billion devices in the hands of users within the next few years. Mobile devices are now replacing computers and gaming consoles. Do I see anything replacing smartphones/tablets anytime soon? No. That's why the bet is obvious to me, your audience is shifting to a new platform. Apps ARE the future because that's where the audience is and will be.