Whether this is a loss of five seats or gains of value add for all the other seats surely is a target for argument. However, the fact remains that, like children who cannot vote for themselves, at some point those who do vote (or pay for tickets) must stand up for their needs; and flying has yet to become an experience for small children.
As for the older children, there are innumerable configurations of edutainment, opportunities for other engagement. Again, we recommend bringing in child psychologists, educators and other subject matter experts to converge on this challenge.
A few thoughts in this direction include a choice of packages pre-prepared, the choice made by the child just before boarding (to be a current reality). Such choices would include boy or girl, about airline staff and flight, about meteorological and geologic phenomena (clouds, mountains, etc.), areas of subject matter that test well and are based on developmental age ranges. These packages should be rich in infotainment, gaming, etc. McDonald has shown us (with their Happy and Kids Meals) that one can acquire toys at disposable prices, and this needs leveraging.
Depending on how evolved the technology on a given flight is, USB drives (now relatively inexpensive) can be preloaded with all manner of computer-based activity as well.
Given the recommended changes are value adds, the price of a youth ticket may justifiably go up somewhat to offset the cost as well. As stated earlier, the benefit is not just to the children and parent/guardians, but also to the general atmosphere of the travel experience for all. These large multinational and legacy carriers will naturally need to create the various metrics, test market where possible and the like, yet it seems this is an underserved (due to being unvocal/un-paying) population needing to be addressed eventually. This writer would submit this as a need to be done as well, even if the numbers are not as attractive as some would like.
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