I've seen these in a commercial establishment before, and it made sense, but not the way these guys are doing it.
Spinners arcade in Fredrick Maryland has maybe 20 of these.
Here is their main arcade.
And here are the Arcade1up rooms in the back
It is a commercial arcade (well, really a charity non-profit) but you pay a fee for unlimited playtime on the pins and the arcades.
From what I've seen, people come in, spend 5 minutes on the 1ups if that, then move on to the real arcades and pins. They are also in the back sort of seperated off where it is a bit quieter, and the location actively caters to autistic kids so that kind of makes sense.
However, the gall of putting just one ups and charging an entrance fee is ridiculous. I have a handful or 1ups myself, and don't think they will stand up to commercial use. My racer has plastic pedals which are fine for home use but would get destroyed instantly on location. Big Buck hunter guns will break if dropped. The balls on the joysticks they have there will just twist off.
They are fine for home use but these will break quickly when abused like they no doubt will be. I had a Tempest 12 in 1 that broke within a week, got a replacement panel under warranty and it broke in under a week. I had one of those arcade legends and it broke within a month. Some models are better than others and they are great for what they are. Heck, I've gotten more bang for my buck out of my Outrun Racer than any pin or arcade I've ever had. But I don't see this working for more than a few months. Yes you can get replacements cheap, but these are totally unsuited for commercial use. On top of that, a cheap arcade with these types of games is not that expensive to put together. I can get a real GoldenTee cheaper than I can get the 1 up version. If you want an unlimited arcade, at or under the 1,000 mark per machine (as opposed to 600 for new oneups) you can about 1/2 of the games you see there. Maybe not the best examples but in an arcade setting kids don't care.