Gotcha.
A while back we considered opening up a smaller arcade arcade across town.
Based on empirical data gathered during our time in business (game revenue + guest feedback) we would definitely be using quarters again even in the absence of the "gimmicks".
We had a private party once that insisted on the games being set to freeplay. So, we put a bunch of credits on all the games... I repeatedly saw people walk away in the middle of a game because they had no vested interest in it.
The quarter drop is an investment that creates a vested interest which in turn makes the game itself more engaging.
So I agree with the OP, freeplay kills it... at least in public venue IMHO... of course it might be different in a home arcade setting.
If you have a stand alone arcade you will have people come in, spend $1-1.50, and walk out. The typical average spent at an arcade is $5, and it takes time to actually see that in the machines. When you add in the coin mech/ maintenance, licensing for coin op that varies by city/state, as well as extra labor involved collecting/meters, etc, there is no way I would say that makes more sense than someone walking in the door, handing me a $10 bill, and doing whatever they want to do. They paid the admission fee, they can come and go as they please, and I have their $10 already.
You are right, most people will walk away from games, that has to do with low attention spans and "free money" given to kids anyway these days more than earned allowances. This essentially is why the "ticket" option has always worked for redemption as a gimmick for prizes.
Of course customers would rather have games on quarters, lol. That is a no brainer. I would too. I'm good enough to sit there and get replays on pinballs all day and have 30 min-4 hour+ games on various classics.
We have done quarters in the past. Inside a mall and outside a mall before I went to the Free Play option. I will say that Free Play saved our business. We had LESS customers when we started Free Play and MORE revenue. The place outside the mall on quarters GROSSED $350 the first month. Second month was $300. Closed up and that was it. That was the ONLY time we have ever closed because the business failed. Inside the mall with 60 games on my side and 30 on someone else's side the place had around $3500-5500 a month in quarters. Since we had a game store as well this was about half the gross....as soon as we did that Free Play, it just all made sense.
We've been on Free Play since June 2012 and I have been open since Nov 2008. Saved the business and I will never go back.