When I was in Sapporo last year - arcades are still alive and kicking. There were TONS. 2-3 within a couple of blocks when I was staying downtown.
One of the coolest things there were these full HUD gundam games. Cost 5$ a play, but it was pretty awesome (I still have my pilot card). This one arcade had about 6 pods and probably one 200 games.
If arcades are to survive, they need to create an experience you can't get at home. The silent scope series had the right idea.
