I think there's an underlying assumption here that an advanced culture should be similar to our own.
Let's reverse the question: "How did a culture that stages such bloody spectacles manage to achieve so much?". Rome didn't become advanced and then start with gladiator games; those were around in some form for a long time. Is it that big a shock that Rome managed to get far without abandoning those games?
Yes, they stem from the human sacrifice of captives at the funerals of big guys, really old. Downright sacred, originally, not just a spectacle.
Your proposal sounds good. If I interpret it properly: cultures have old traditions that live on despite maybe even contradicting their own values. I.e. if they had to invent it at that, they would not, because it contradicts the values, but being a tradition, it carries on.
For example today we would not invent cars or at least would not allow civilian car ownership. We have a safety oriented culture and proposing...
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