The word "isekai" will mean nothing to those outside of anime fandom. However, by definition, the Isekai genre -- which also includes light novels, manga and video games -- is the Japanese equivalent of the portal fantasy genre in the West. In an Isekai story, a protagonist from Earth is transported to, reborn in, or trapped within an alternate reality of some sort -- usually a fantasy one. This world can be material or digital, as in an MMORPG (Massively Multiplayer Online Role-Playing Game).
But while several great series' have come as a result of the isekai boom, many others have contributed to the medium's stagnation. The genre has become increasingly formulaic; even variations of it still capitalize on the audience's familiarity with previous entries in said genre. In other words, the isekai train might be running out of steam -- and it might be better to take that train off the rails than to let it crash.
ISEKAI IN A PRE-SWORD ART ONLINE WORLD
The Isekai genre isn't a new thing in anime -- nor really is it a new idea in fiction. Lewis Carroll's Alice's Adventures in Wonderland could count as an isekai, as would Peter Pan, The Wonderful Wizard of Oz, and The Lion, the Witch, and the Wardrobe.
Older anime like Aura Battler Dunbine, The Visions of Escaflowne, Kyou Kara Maou, and The Twelve Kingdoms all feature characters entering fantasy worlds. They often utilize the tropes of the fantasy genre, and have a lot in common with Record of Lodoss War. Anime like Fushigi Yugi, Magic Knight Rayearth, and Inuyasha combine the tropes of early isekai with shojo anime, coming to prominence during the American anime craze of the '90s.
Oh, and yes, Digimon counts as an isekai.
Arguably the best example of a pre-2012 Isekai anime is Spirited Away, which serves as a portal fantasy in the style of Alice in Wonderland.
If this proves anything it's that Isekai anime before 2012 spanned a range of different genres with different focuses. However, come 2012, one anime would emerge that would reinvigorate and refocus it, drawing tons of new fans to the medium, and, in turn, firm up the already established tropes that the majority of Isekai anime to follow would copy.
THE SWORD ART ONLINE EFFECT
Anime has gone through periods of rising and falling popularity in the West, with individual properties often at the heart of each new swell. In the early 2010s, one such property was Sword Art Online. SAO, as it's often referred, came out around the time that streaming services like Crunchyroll started to greatly expand their libraries of legal anime available to stream on-demand at affordable prices. This could well have factored into the series' explosion in popularity. Or, perhaps, it was just pure wish-fulfillment on the part of fans.
SAO is set in a world where a totally-immersive VR headset -- "NerveGear" -- is released. The main character, Kirito, is a beta tester on the first game released for NerveGear: the titular Sword Art Online. However, when the game is publicly released, it turns out the game developer has a bit of a God complex. It becomes a Matrix-esque experience where, if you die in the game, you die for real. The only way to escape is to finish the game, so, of course, Kirito, who happens to be the best player ever, sets out to finish the whole game in order to escape it.
In many ways, Sword Art Online had a lot in common with .hack, another franchise where the main characters are payers in a VRMMORPG. .hack came out in 2002, and SAO's light novel source material was self-published by writer Reki Kawahara shortly after that same year. Perhaps in taking ten years to be adapted, SAO put enough time and distance between itself and .hack to appear more unique.
If SAO wasn't a mega-success, the conga-line of imitators would never have come. But it was, so writer after writer churned out more light novels inspired by SAO, which became mainstream anime -- to diminishing returns of success.
RINSE AND REPEAT
SAO established several box-ticking ideas that have become cliché. The other worlds the heroes are transported into are usually either MMORPGs or inspired by them. They follow rules like video games. The supporting cast consists of stock characters in a fantasy story, with some of the weakest isekai entries never bothering to give said characters much development.
But there is one trope that is so infuriating -- so exhausting -- that is has resulted in the Isekai genre hitting a wall where entertainment value is concerned. The protagonists, like SAO's Kirito, tend to be extremely savvy with video games and fantasy tropes before they even start on their adventure. Despite having no skills with actual sword-fighting, magic, etc., they are all so well-versed in genre conventions that they can solve every problem that comes their way with little effort from the start.
Kirito in Sword Art Online appears to be good at every video game he picks up. While in the show's first arc, he served as a beta-tester in a game, when picking up a new game with entirely new mechanics, he becomes the best at said game within days. With increasingly fewer stakes in each arc, it becomes clear that Kirito will win every time no matter what. Also, every girl in the game will have a crush on him, despite his bland and generic personality.
In short, the big problem with Sword Art Online is that Kirito serves as a total audience insert. It's all skin and no meat.
How to Summon a Demon Lord, Overlord, No Game No Life, and Log Horizon all feature similar characters. Some Isekai anime does put the protagonists at a disadvantage in an attempt to add a spin on the established formula. Anime such as The Rising of the Shield Hero and That Time I Got Reincarnated as a Slime make the heroes, by default, weaker than their peers, yet, come the end of the series, they still solve every problem sent their way, drastically lowering any stakes.
SOME BREAK THE MOLD - BUT NOT ENOUGH
Two huge exceptions to this are Re:Zero and KonoSuba, which are often touted as two of the best Isekai anime the genre has to offer at the moment. They do it through deconstruction: Both series present "losers" who think they know what they're doing in a world that's far more complicated and dangerous than they have any idea. They fail -- often.
Some anime attempt to divorce themselves entirely from the Sword Art Online formula -- often successfully. Drifters and The Saga of Tanya the Evil are good examples of this. However, there just aren't enough to break the monotony.
Like any genre, formula is the key to success. The problem is, without continual reinvention, the genre wanes, as this the case at the moment for isekai.
ISEKAI IS ON ITS LAST LEGS
Though isekai has become overwhelmingly popular in Japan, there are signs of the bubble bursting. In 2017, publisher Kadokawa issued a major story contest where it outright told no one to submit any isekai stories at all. However, with the amount of isekai stories still being self-published online, it's clear that anime studios will have access to tons of new source material that could repeat the formula SAO started over and over again.
But, then again, it isn't just publishers who are tired of isekai. Also in 2017, a Japanese poll asked audiences about their favorite isekai anime and ranked the top 15. And guess what? Spirited Away came in at number one, while the rest of the list mainly consisted of anime that diverged from the SAO formula (Re:Zero, Drifters, KonoSuba) or were made before SAO was even released (Twelve Kingdoms, Kyo Kara Maoh, Magic Knight Rayearth). Innovation is rewarded.
If the same stuff keeps getting made over and over again, the genre will stagnate. Do we really want to keep watching rehashes of SAO, or do we want something fresh again?