I hope they go in this direction, it is much better both from a story and a player perspective.
It would help a lot to lose the silly filler fights and would give us the opportunity to play bad characters even if only for one or two fights, which is really good, as making chapters for the bad characters is tough. It's easier to justify good guys not finishing their opponents, because, i mean, why would Sektor not kill you?
When given many fights back to back it becomes a problem from a story perspective, how many times can they ally with a good guy that forbids them to kill, or be robbed of their victory with a cutscene where the opponent wins, or another guy coming to save the loser? If 4 bad characters got chapters of their own, and saying one of them actually kills one of the good guys, then that means we'll need an excuse for them not finishing the loser 15 times. If 2 of those same characters get 2 fights each, and the other two get only 1, then that means we'll need only need 5 excuses, a third of what we would need otherwise, allowing for a better story to be told while still allowing us to use those characters.