Now they have to rebuild from the bottom. Spend way less money than on COTW, try to make a solid game, then do a little better next time. That's how Arc went from the most niche studio in the genre to cranking out 2 or 3 successful fighting games a year.
I think that rather than spending less money, they just need to spend it wiser by directing more of it towards development rather than crazy marketing. If they're going to be funded by Saudi blood money, then might as well take advantage of it. Increase staff and resources, move to UE5, and make something that competes with SF6 and MK1 and looks truly like a AAA title, because casual fans want that sweet, sweet eye candy.
And on that subject, they need to make something that deviates from the graphics style every game has had since Sam Sho 2019.
Nothing against it or wrong with it, but the various series need to have distinct looks from each other just like they did on the Neo. KOF should look like KOF, Fatal Fury should look like Fatal Fury, yada yada. Helps with brand identity and makes them more distinct products.
They also need to get out of the fighting game pit. That can stay their bread and butter, but they need to get some ARPGs, 2D Metroidvanias, or other popular genre games going. Fighting games in and of themselves can be really limiting to a specific audience, and with everyone eating up retro revivals like Shinobi, TMNT, X-men, and Ninja Gaiden's recent 2D games, they'd be wise to hop on it while the hopping is good.
Magician Lord is perfect for a Metroidvania. Sengoku or Mutation Nation could be revived for a modern 2D beat-em-up, or even better, make one that's similar to KOF All Star (RIP) that plays like a proper beat-em-up with similar mechanics and a full roster of characters. And Metal Slug will always be Metal Slug, which is ripe for another proper 2D entry that isn't bogged down by mobile gaming gatcha bullshit. They did good with Tactics, keep that going.
That also makes me wonder where they're at with the Sam Sho ARPG they've been working on for a few years now. There hasn't been any news at all since it was first announced, which is worrying.