The problem with horror games is the lack of mainstream popularity. Resident Evil has always been popular but that's the exception. I think Resident Evil came around at the right time and it stuck. The horror genre is kind of a niche genre which is why we don't see many horror games that aren't crappy Steam Greenlight games. A really successful Resident Evil game might sell about 5 million copies, which is far short of what games like Call of Duty and GTA sell. So if Resident Evil sells 5 million copies, then something like Silent Hill will be lucky to reach 2 million and Fatal Frame will be lucky to reach half a million. In the PS2 era, these sales were sustainable. They aren't anymore. Games cost too much to make and these kinds of sales don't justify the need for more horror games.
If you notice, development costs has led to less games in particular genres being made. During the PS2 era, we had our share of GTA clones. We don't anymore because those clones never sold as much as GTA and the budget to make those games in today's market outweigh the sales those games would be bringing in. The same thing happened to the horror genre. On 5th and 6th ben consoles, there were all sorts of horror games. There aren't anymore and we're going to have to accept that.
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