This is because weekly releasing prolongs the hype of a series for months as, along with the release being drawn out for longer, the week in-between each episode airing allows lengthy engagement, discussion, and theorising based on the existing episodes, with fans being able to come together and try to predict what will happen in the next episode.
Both online and in-person, this mass discussion essentially acts as free promotion for the series as the conversations and online content surrounding its possibilities massively increase its visibility which both keeps current fans engaged, and attracts new fans.
On the flipside - From my perspective, little to none of this happens if the series is released all at once instead. Most people will finish the season within a couple days of release, and there will obviously be discussion that can attract new fans, but with no later instalments (at least until the next season) the hype can only last so long.
Yes, shows can still be insanely popular without being released in weekly instalments, but its reign in the public consciousness can be arguably held back, as meaningful speculation (whether in discussion or as online content) can't really be done in-between episodes, instead being limited to just speculation of the next season, if that even applies.