You may be making a very common mistake here - the goal for a given game isn’t necessarily to dethrone the genre leader. The goal for most live service games is to attract a sufficiently-large audience so as to sustain continued development costs and earn a reasonable profit. This is why, despite the vast majority of MMOGs not dethroning WoW, games like FF14, Runescape, Path of Exile, Warframe, Lost Ark, ESO, Guild Wars 2, EVE Online, SWTOR, ROBLOX, Black Desert Online, and New World are still continuing to sustain themselves. Sure, League might be the biggest MOBA out there, but there’s still DOTA 2, Smite, Arena of Valor, and Pokemon Unite. Setting the bar for success at utter dominance of a genre isn’t really feasible. What most live service games aim for isn’t unconditional victory, it’s sustainable profitability. That’s a lot more reasonable as success criteria.
The reason live service games are so attractive is because they are more likely to be sustainable. It costs a lot more resources to develop and build the first bunch of game systems and content than it does the post-launch systems and content. The reason for this is because we don’t know exactly what works and what doesn’t the first time around, so we have to do a lot of experimentation, tool building, and make a lot of adjustments as we figure out what it is we’re doing. Once we have the tools and systems built and earned enough experience using those tools and systems, it’s a lot easier and cheaper to create more content with those tools and systems than it is to dump all of those systems and tools to start over fresh on a new game. Some genres lend themselves more to keeping the same tools and features for each game, but most players expect new games to have more new features, new systems, and new content than expanding an existing game. The expectations are lower for an existing game.
You’re right in that live service games tend not to share audiences as well as other games. This is because most players have a finite amount of time and attention to play. This is why live service games are often called lifestyle games - it’s just a game that their audiences play all the time. You’re also right in that live service games don’t work for every kind of game. It’s just important to note that live service games are extremely attractive to publishers because a successful live service game is worth much, much more than a successful single-sale game. The successful single sale game nets a spike in revenue and the desperate hope that the next game the team builds will do as well or better. A successful live service game means reliable and sustained income for at least a year (possibly longer) after launch. That kind of reliable revenue stream is extremely attractive to businesses and investors.
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