Broadly speaking, it's fine for something to exist as a niche. Whatever form of media a thing might be, to fulfil a niche is to meet the expectations of at least a handful of people with a particular taste that many others don't, and I think that's a delightful thing to do. In video games, immersive sims might not be the most niche genre in the world, but they've historically not done gangbusters sales wise, meaning that triple-A takes don't quite make their money back. If you ask Randy Smith Evergreen, a designer on Thief: The Dark Project, perhaps avoiding the world of triple-A is the way to go for immersive sims.
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