Its a myriad of factors but i'll try to summarize it plainly.
First, market expectation. The expectation from the market on what a GAAS or live-service title needs to be at launch has drastically increased in the last 4-5 years. Its not enough that you have a solid MP mode, launched as F2P - you need to have ample loads of modes, passes, cosmetics, earnables, etc. - all day 1 when you launch.
The Finals and Lethal Company kind of disprove your theory here. The Finals has 2 game modes, and pretty sparse cosmetics at the moment. It's a huge hit because the core gameplay is so enjoyable. Lethal Company has turned into a revelation and it's made by 1 person.
People do this a lot online, but it's so overwhelmingly untrue...Players only care about cosmetics and Battle Passes if they love the core game. You're putting the cart before the horse when you overinflated the importance of "modes, passes, cosmetics, and earnables on day 1".
Gamers are much more simple than that. They want games that are fun to play. Once you have that, THEN the secondary stuff becomes important.
Its an unfair comparison, to be sure, but when you launch today, you're immediately compared to the likes of Fortnite, Minecraft, Warzone, Destiny, Rocket League, Apex, Valorant, just to name a few. So if you're not offering a similar breathe of content on day 1 now that those games are offering after years of support, you're already starting well behind the starting line.
I semi agree with your take here. You can't make an inferior version of the games listed above and expect to succeed. You need to do something unique to draw players...because if you're a B tier version of a Fortnite, you're just going to get steamrolled by a bigger, more well oiled machine (Epic Games Fortnite Team).
But this is not new and is something most developers have understood for years now.
Secondly, the above factor also ties into just how big the team sizes need to be not just to deliver the base game, but to keep the game going. When a game as big and as lucrative as Fortnite is still resulting in 18% of Epic's workforce being cut this year, it tells you a lot about just how expensive it is to keep the support teams for these larger projects going.
This point is likely wrong as well. Epic Games is a multifaceted company. The most profitable part of that company is Fortnite. Epic Games Store, is their money pit.
About two-thirds of the layoffs were in teams outside of core development.
The great thing about GAAS that remains true to this day is that, once you have a hit, you're revenue is far more predictable than if you're forced to make big expensive single player games. Epic has a pretty line graph showing revenue trends of Fortnite going all the way back to 2017. That means they can safely budget team sizes without breaking the bank.
Many of these games launched as either experiments or even as an indie dev project, but now these studios have over 1k devs all working as a content delivery team for a game that has existed for however long. The perception among the financial folks at pubs was that GAAS was super lucrative because a small support crew could maintain the userbase and deliver content, while the primary dev team goes off to make other projects. Nowadays, the cost of running these support teams dwarfs AAA game budgets.
There's no good data publically available to see how many employees are working on games like Fortnite, Valorant, League of Legends etc...
A company like PlayStation is far more knowledgeable about that stuff and they're going hog wild into GAAS which suggests the math looks awfully enticing for them.
Both the financial commitment and manpower required to make a true swing in the GAAS field has never been higher. Most devs who wanted to get into it never imagined it could've ballooned to this point. And even for the big players, they are all increasingly seeking ways to experiment and grow their base audiences in order to attract large groups of new users (see how Fortnite has expanded in recent weeks).
PlayStation has repeatedly projected the Live Service segment of the market to grow at a blistering pace over the next 5 years. They have shown a repeated commitment to this process.
Because PlayStation is actually working from numbers, and we're not, I tend to think they know what's up.
