Actually, it’s a very profitable genre if done right. Probably one of the biggest reasons why a lot of indie devs started making retro “8/16 bit” games was due to the massive overhead that asset creation eats up. Time, expensive software(if you don’t want to use blender), tons of training/experience needed, etc. I forget the exact numbers/estimates, but somewhere I remember seeing a dollar value cost for a typical main character, as in a detailed character that you’ll spend a lot of time seeing and that isn’t some background actor in a crowd, in a AAA studio. It was something like 50-100k USD after you factor in all the man-hours…
So rather than have a group of five or six people modelling, animating and texturing a character, over the course of thousands of hours, you can just have one person that spends less than a hundred hours to make a retro character with some sprite animations…
They aren’t going anywhere though and the market for them has continued to increase in PC, console and mobile platforms. Not everything has to have fancy graphics…