the cosmetics are stupid, but thats not the main thrust.
the real world can't compete because its expensive and devoid of children.
YES! This is a big piece of it. Fewer kids + more of them wanting to be inside / parents wanting them to be inside = less kids to play with = even less likelihood of them wanting to play outside.
This is like social media in reverse: nobody wants to be inside, but some people are only inside, so everybody is inside.
I compare this to my neighbour's daughter who is now about the same age I was when my dad would kick me out of the house, and said neighbour's daughter never goes anywhere without her parents. She's somewhat socially maladjusted and doesn't know how to get along with other kids her age outside of sports, and I believe this is because she's not around other kids outside of school except for basketball practice or matches she's in. She wasn't like this a few years ago. It's alarming how such an athletic child can spend so much time inside the house doing... Whatever sedentary activities.
(WHY they want to stay inside is another matter, but I suspect a large part is the stereotypical answer: unending seas of digital content highly optimised to hack the consumer's brain.)