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Seriously. Every XCX thread that is made eventually derails into talking about how bad the characters look. What are you even talking about!? Look, I get it if you also thought that the characters in Xenoblade Chronicles looked bad, but if you didn't? What are you going on about? They're the exact same art style! XCX looks infinitely better!

It really boggles my mind, but recently I'd been trying to work it out, and I think I've got it. I finally understand what people see. It's the "idle" dialog scenes. More specifically, it's how they're animated. You know, the scenes where the characters are speaking, and there's still voice acting, but it's not part of a scripted cutscene. Those look too good.

You heard me. Those idle dialog scenes are such good quality, that I think a lot of people are mistaking them for scripted cutscenes, of which they'd obviously still look stiff next to. But next to the idle dialog scenes in XB? It absolutely blows those out of the water. Think back to when you played Xenoblade, and one of those many scenes came up. Characters would cycle through short loops of limited animations. They would literally turn on their heels to look at the characters who were speaking. The faces were all... stiff. In XCX, the characters turn much more naturally. The animations in between these "looped" animations are much more fluid. Characters' eyeballs actually look at the person talking instead of having their whole body about-face to directly face them. The faces are far more animated. As in, they actually have basic animation at all.

It's a fantastic improvement all around, but clearly not as fantastic as the custom animations of the scripted cutscenes. And they can't be. At least not for their budget. But here's the biggest difference. In XB, you knew you were in these lower quality scenes because, aside from the dramatic drop in animation complexity and quality, you actually had to click a button to move the dialog forward. As far as I can see, this isn't the case at all in XCX. In those very same instances, you do not get to control the pace of the dialog. Or at least, there is no button prompt to let you know that you can. So a lot of people were looking at these "idle" scenes, which are presented in the same exact way as the scripted cutscenes in XB right down to the way subtitles are formatted, and they assumed that these were the scripted cutscenes. But they're not. 

And in actuality, we've hardly seen any scripted cutscenes at all. Very few. But once you have everything I said in mind, it's beyond clear which ones are. Most prominantly, the story trailer from last year's Digital Event. Aside from that, we've only gotten the opening sequence, the part where the player and Elma first take in the scale of Mira, and the scene where Elma and the player take in being inside New LA for the first time. That's. All. (Well, there's actually one but in the newest direct when the aggressive alien race is introduced to be "invading" New LA. You can see NPC's reacting to it)

And out of all of those times, there have been even less moments explicitely focusing on a character's face. And when it has, they've looked great. Tons of emotion and everything. The animation is in the exact same unique style as those in XB, and the character models look much better. Far more detailed, but all in the same art style.

Which is why, if you think that the original XB had an ugly art style, I completely understand you not liking this one. It's just more of the same. It's an identical artstyle with higher quality models and more complex animations. But if you don't hate the art style of XB, aspecially if you like it, what the hell are you talking about?

I think the last possible thing I can think of as to why people may think the characters look creepy is the player avatar. Everytime they've shown him (or her) off, he's had the same slanted Egil-esque eyes that are completely off putting and a little uncanny. But you'll obviously be able to choose different, more appealing characteristics, including the eyes. Sometimes I think that people are judging the whole game's character design on one completely custom character's preset.

I may not fully understand why people are put off by this game's character design, but that was a theory that I've had ever since I noticed it, and I had to share it before another comment like that sprung up again.