As the cost of making video games has gone up, publishers and developers have looked for ways to get players more invested in their franchises. The more invested a player is, the more likely they are to buy DLC for the game and sequels in the franchise later on. They are also more likely to buy the outside merchandise like toys, books, and board games. One of the big problems to solve was getting a player to spend more time with a game until the DLC or sequel came out.
For example, Star Wars: Jedi Knight could be beaten in about 20 hours the first time through the game. There were two different endings to pursue in the single player and a basic multiplayer mode, but not much else to do after that. That meant you were pretty much done with the game after a month or two. If you liked the game, you might come back and play through it again from time to time. By the time the sequel came out you may have forgotten what Jedi Knight was about.
People are afraid of the unknown, which causes doubt about buying the sequel. If they do not remember how they felt when they played the previous game, they are less likely to buy the sequel. However, if they were playing the game just a few weeks or months prior, they might remember how much fun they had and decide to preorder the sequel or buy it on launch day. When developers started looking at ways to get gamers playing their games longer they found one particular genre of games that seemed to do this well: RPGs.
Role-playing games by their nature are longer than other games. The basic idea in role-playing games is that the player gets to make many choices throughout the course of the game. They can choose which items to equip on their characters, which character skills or spells to use, how to respond to non-player characters (NPCs), which quests to tackle, and what order to tackle them in. All these choices could greatly change how the game plays, creating opportunities for replay value.
The player is compelled to play through the game again to see what would happen if they did something different. This replay value was great for two reasons. First, developers could create the same amount of content as before, but stretch out how much time people play the game quite a bit. Second, players would be more likely to play the game for years, even up to the release of the sequel (and later, DLC). Developers quickly started adding RPG mechanics to their games.
First-person shooters suddenly had experience points and levels (named military ranks) in multiplayer. Call of Duty 4: Modern Warfare was the first big game to do this. Multiplayer ranks could only be obtained by getting experience points, which were gained by doing well in online games. Enemy player kills, friendly player assists, completing objectives, and winning games all awarded players with experience, among other things. The multiplayer ranks were not just for bragging rights though. They also provided unlocks.
Unlocks could be completely cosmetic like different camouflage. They could also provide in-game benefits like an assault rifle with a tighter spread but slower rate of fire. These greatly increased the replay value of the game. Before you started with everything up front. You quickly found your desired weapons and gear. Then it was just your own self interest to keep playing to get better and win more games. With unlocks, players stuck around knowing they might like some later weapon or equipment more than their current ones.
The same thing happened with strategy games, such as Fire Emblem and Warcraft 3. The mod community continued this with the Defense of the Ancients custom map for Warcraft 3. In this game everything was unlocked upfront, but there were thousands of combinations to try greatly changing how it played and extending the replay value. Besides choosing your hero, of which there were over 50 (last I played), you also could choose what equipment to wear, the order you learned new spells, and which role you wanted to play.
Action-adventure games also caught on to this with Batman: Arkham Asylum and its sequel being the prime recent examples. Players get XP for killing enemies. There is also a combo feature that rewards killing many enemies in succession by multiplying the XP gained per enemy. This XP can then be used to unlock new abilities for Batman. It takes almost a full playthrough of the game to unlock everything, so players spend a lot more time playing this game than previous action-adventure games.
Developers slowly incorporated RPG mechanics into other game genres until the present. These days almost every game genre incorporates some gameplay mechanic that originally started in role-playing games. As a fan of RPGs, I like this a lot. I feel more invested in the game since I can mold the game to fit my tastes. I want to continue progressing in the game, so I buy more DLC/expansions for that game. I might wait for the prices to drop if the extra content is overpriced, but some money for the publisher is better than no money.
The downside to this is that it is hard to see all that a game offers unless you put in a lot of time to try out all the combinations available. There might be 5-10 major titles every month, but you only have time to realistically experience all of the content in 1 or 2 of them. So I buy fewer games than before. The few publishers that get my money, get a lot more money than they previously did. This is exactly what the publishers wanted, but it also creates another problem for the industry.
It is easy to see how this business model favors the big publishers. They use their huge marketing budgets and long development cycles to ensure their games will sell well. Combined with the RPG mechanics, players give even more money to the big publishers. Publishers now spend hundreds of millions on one game. Every game has so much more going for it than before. One failure is enough to put a small- or medium-sized publisher into bankruptcy.
Publishers are no longer able to take chances on creative new games either. They are forced to release small iterative updates on the same old games with few innovation. Indie and mobile games are largely avoiding this problem, but it is a pretty big issue for the traditional games market. I am still not sure how the industry will solve this problem. Perhaps there will be another video game crash with most publishers going out of business.