There are lots of arcades in Japan. Hell, there is a book's worth of arcades in Japan. But elsewhere? Hrm. The head of SEGA's AM2 arcade division, Makoto Osaki, calls the arcade market outside of Japan "practically dead" in an interview with game site Kikizo. Here's Osaki:
Let's not even go into the overseas market... it's practically dead... The market there is entirely redemption [prize]machines now. The users in America just don't go to arcades anymore, because they don't see why they should invest the effort when they have games at home... In Japan, you've got arcades near train and bus stations that the vast majority of the people have to pass going to and from work, so they get a lot of traffic.
Definitely worth checking out the full interview. That, and feeling bad for the death of Western arcades.