Ironically what accelerated the death of Japanese software craftsmanship was the demise of Sega’s presence in the console market. Like Nintendo being the only dedicated gaming console company left in the industry, Sega was the last bastion of hope for arcade hardware innovation at the turn of the century since SNK’s Neo-geo hardware was already getting long in the tooth by that point and it didn’t look like they were going to make any new arcade hardware (heck, they were squeezing their Neo-geo hardware’s limits all the way to around 2003, I believe), Capcom stopped their own custom arcade boards because they were relying on Sega’s hardware by then (which is why most of Capcom’s best arcade games ended up on the Dreamcast or its arcade counterpart), and before Namco merged with Bandai they were mostly a Sony-exclusive developer so most of their arcade games used PlayStation-based hardware to power their titles to make it easier to port to.
With Sega becoming only a software developer and publishing company from then on, the arcade hardware that popped up during Console Generation 7 and beyond are nothing more than off-the-shelf PC parts cobbled together running some special version of Windows XP Embedded. The irony of this is the fact that these arcade machines running Windows XP Embedded would also have games made for it that would end up becoming exclusives to Sony’s gaming systems. A recent example of this kind of absurdity would be Street Fighter V: the arcade hardware runs on Windows APIs, but Sony paid money for it to be a timed console exclusive on the PS4, but you can buy the game on a PC running… Windows? Not only that, but you can also run said Windows copy of Street Fighter 5, go online, and then square off against someone running the game on their PS4. But you can’t buy a copy of Street Fighter V on the Xbone because of a legal reason, not a technical one.
On a side note, just showing you that example above, I also find it really strange that there haven’t been much news in regards to emulation for arcade hardware released in the past 7 years, especially since all of the arcade games released at that time aren’t running on hardware and software that isn’t that much different from what you’re using to run Windows on. Or a Mac. Also, you are correct that the prices of the HD consoles are actually a lot lower because Microsoft and Sony deliberately take a hit on the hardware price in order to make up for it with software purchases and micro transactions. If they followed Apple’s/Nintendo’s business model where they have to make a positive ROI on their console hardware sales, we’d be seeing Xbone and PS4 prices getting close to iPad Pro and 12 inch Macbook ranges.
Old way: Buy this game because it is addictive fun. You buy more games to have more addictive fun.
New way: Addictive fun makes you buy more shit. Games aren’t designed around having addictive fun, games are designed around shops.
Old way: Buy ticket to go on rollercoaster.
New way: Ride rollercoaster that takes you to gift shop where elevated highs maked you buy shit.
Is this where we want gaming to go? Everything feels wrong.