I seriously doubt that anyone who started with Arena would call that his/her favorite, so I don't think it's as simple as that.
People who are comfortable with older tech will have no problem with Daggerfall or Morrowind, so there's no being put off by the more "primitive" graphics and animation. If one can look past those "problems" to the actual content, one finds that they are profoundly complex and rewarding games.
Having said that, I started with those older games, but I now regard modded Oblivion as my favorite. That's because, as primarily a role player, I find Oblivion's open world and wide character creation to be best suited for playing out my own stories (as opposed to Bethesda's quest lines.)
If I were looking only at game content, I'd have to point to Daggerfall as the richest, with Morrowind a close second, and I'd put Morrowind on top of the heap as a coherent and vibrant world/society/environment. (Its static NPCs may not be individually believable, but their relationships to one another, and their factional interplay, is second to none.)
My point here is that it's not which game came "first," so much as which game satisfies whatever it is that you're looking for in a game. ...Which, it seems to me, should be obvious...