I think there are pluses and minuses to the kind of old-school training you mention. For the really dedicated people who stick with it, they'll get a lot out of it. But like you say, most people in schools like that would quit after 1 month - so those less-serious students (let's call them hobbyists) will get basically *nothing* out of training in martial arts.
A school that can make class fun, approachable, and relatively safe can have a much higher retention rate among those hobbyists, so they actually learn something and get something out of their training. Maybe the training is less intense/rigorous in any particular class, but you're able to reach a much broader crowd of people, and more people end up learning the martial art and benefitting from it. I think that's a good thing, overall.
Of course, a school can also go too far, and lose the actual martial art in favor of basically just doing a fun light martial arts-themed workout class. (Not that there's anything wrong with workout classes, either, but that's different from actual martial arts training.)