It's a double edge thing really. You want people to experience content on all playerbases, not just the top 10-15%. On the same hand, you don't want to give the misconception that players feel they'll be able to tackle on challenges.
LFR wasn't introduced until late Catacylsm for their end game dungeon. It had difficulty toned down and some mechanics were removed. In return, it gave signifcantly weaker loot, but people were able to experience part of the fight and the story. Normal/Heroic was still left intact, and I can attest that the mechanics are miles different and offers a much better experience for those that can get into it.
Although their next expansion (MoP), I feel they really overstepped in closing the difficulty gap, top that with huge stat inflation inbetween raiding tiers within the expansion. I'll say it right now, a good handful of the bosses had really meh mechanics for the final raid, with very few exceptions. It felt too easy even in Normal difficulty; there wasn't too much of a jump between the two. Now top that off with people be able to recruit cross realms, you could easily pug normal difficulty.
Now the problem with FFXIV like you mentioned is that there's no separation between the content. Titan EX is an incredible wake up call to unsuspecting players with the huge increase of phases, mechanics and the like, even in comparison to Garuda EX. Made all the worse that you can DF it. No amount of Echo or stat boosting will save you from the likes of Landslide or Divebombs.
I've thrown this out a few times for WoW;
LFR = You stand in the fire, you get a slap on the wrist
Normal = You stand in the fire, you die.
Heroic = You stand in the fire, you combust and kill everyone in the raid.
The way I see some raids and trials right now, it fits into the Heroic category. It gates players from experiencing content that people should all be able to get to, but at the same time like I mentioned above, no amount of stat boosting will make it easier because of those mechanics obliterating the raid. It does help with progressing the fight quickly to enter the next phase (no one likes spending 2-4 minutes to get to the conflag phase).
Keeping it the way it is probably isn't going to kill subs, but it's definiately gating the way to getting more if players are able to experience all the content the game has to offer, while at the same time being able to appeal to both casuals and the top 5-10%.



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