Casual consumers are rejecting them.
"Smart" has nothing to do with it. They can make games targeting casual audiences like NRS does (at the expense of the games competitive side) or they can make games on the proper-model for their core audience.
Until now, they've tried for the best of both worlds and pleased nobody.
"The best" is, er... well... I'm not sure I'm with you on that.
And, again, what is their "core audience"? Am I not part of the "core audience" because I prefer to play solo... and HAVE played Street Fighter solo since the Arcade days of the original game in the 80s? I've been a Street Fighter player longer than most current tournament players have been alive and have bought and played most Street Fighter games. I bought the animes and movies. I have figures of Ryu and Chun-li on my desk. I own comics, and artbooks, and posters.
But I prefer to play single player Arcade modes. So, what, am I somehow not a true Street Fighter player? Not a "core" player because I don't play or enjoy a particular mode?
I don't see how you can't make a competitive, competent fighting game with great single-player content. Why does a game with casual appeal HAVE to be "at the expense of the game's competitive side"? That honestly makes zero sense to me.
Many games are out there proving you can have your cake and eat it too. Capcom is not the king of fighters any longer; they stopped being competitive with their competition a long time ago.