It's not really online RHYTHM games. It's Asian online games in general - 9 out of 10 fail, and those that don't are the ones with incentive to keep grinding (i.e. MMORPGs) yet dwindle down into obscurity anyway as new titles launch over and over.
That's just how the industry is over here, and I can honestly count the number of casual (non-RPG) free-to-play/premium model games that have survived past two years on one hand.
I can't speak for Pentavision but they probably understand this, which is why DJM-Online was discontinued and 'replaced' with Trilogy which is a PC game first and foremost without the need to connect online. (Seperate issue being the current Trilogy limbo, but oh well)
You're right in the sense though, it's been proven over and over that an online, free-to-play community just isn't self-sustaining when it comes to music games with a production quality somewhat higher than 'lets steal a million MP3s and make continuous jerk-off charts to them' (sup, SDO/XDO).
The PSP series is the right step*. Trilogy was also a right step*, in the sense of the business model being buying a shitload of content up front, rather than trying to entice the masses to play your game with f2p and hoping to live off the goodwill of the wealthier portion of the resultant community. Technika may or may not be a right step* depending on how big the arcade community becomes in the next year or two. Not to mention you can't exactly pirate arcade machines.
*from a financial view.
It's been a long time since O2Jam international shut down, and things have changed somewhat over the years, but what I'd give to get back involved in all of this. I don't speak Korean though, so oh well. :/ | 
:3
