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Correlation != Causation
Street fighter 3 never had a chance in America. Arcades were already dead in America when it released. The only console it was released when it was semi fresh was the dream cast after the dream cast was decided upon to be a failure. It was later rereleased on the ps2 but that was after the game was years old already. Most never even knew it existed.
Street fighter 4 sells due to nostalgia. Street fighter 4 is popular because it is the first street fighter game that many people have played since the release of Street fighter 2. They never played street fighter 3 (or the alpha series for a large part) to be able to judge it.
To me that is like saying "who needs cartoons when we have film." They are two different mediums use to produce two different kinds of products. I would much rather have a sprite representing a cartoony character than a 3d model with shading effects try and represent a cartoony character. It just looks better.
Sprites and 2d games are not dead technologies. There are things that look better in sprites then in 3d. When dealing with things that are supposed to look like a cartoon or be very stylized, sprites have an incredible edge over 3d. If you want something to look realistic, then 3d has an edge.
Of course I am only of those crazy people who think street fighter 3 is better then street fighter 4 in just about every way. including graphics.