It's not necessary, of course, and it's actually a pretty strong indictment of the leveling grind itself to look at it and say, no, there isn't really much of a reason for it to exist. Most games give you a gigantic breadcrumb quest curve that takes you through a series of narrative arcs that (hopefully) mask the grind. FFXI does not. It would be cool if it did, but I hope we can both agree that a finite development budget for a 10 year old game where nearly everyone is at the level cap ought to go towards making content for that level cap first.
So no, I would never say it's necessary but it's probably too much trouble to just up and get rid of, and I think Abyssea and book-burning are about as close as we're going to get to the devs saying they agree with me. =/
More directly, it's okay for most games to have an XP grind because that grind is hidden behind a narrative arc. In WoW, you're traveling across the world (of warcraft) killing 15 raptors for whatever guy wants you to kill 15 raptors at THIS quest hub. In LoTRO and SW:ToR (which do it much better), the whole game's pretty much built around huge narrative arcs that lead you to the level cap almost as an afterthought. ET CETERAI applaud you for at least having whatever it takes to provide an answer, as the others don't seem to have. Would it be OK with you in future games if there were no EXP or levels to grind at all? Why or why not?
So if that kind of attention's given to it, yeah, I think it's fine for that to be accompanied by a tangible increase in power and flexibility for the player to enhance the sense of Progress. For a game like FFXI, it's probably pointless.


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