With the topic back in the news again with a PS4 version of God of War Ragnarok confirmed (and with it a pivot to fairly much releasing most PS5 games on PS4, as Microsoft are with Xbox One), I wanted to start a thread which can hopefully at last cover the cross-gen release debate from several different angles. Angles both which explain why both competitors are releasing first party cross-gen, and also fuel a more comprehensive debate about whether they should be doing it or not. They are namely;

1. Sales revenue from the games
2. Quality/ambition of the game (on the latest platform)
3. Effect on console sales.

The first effect is quite straightforward. More platforms means more sales by giving you access to more consumers. Dynamically you get more money which may or may not lead to more money invested in future games. There is something to be said about the fact that cross-gen games don’t tend to sell quite so well on last gen. This may have something to do with the fact that the consumers most likely to spend on new games are also most likely to have bought a next-gen machine.

The second effect reduces to the “limited by” argument. While I’m absolutely not a software engineer of any sort, there is a limit to the scope of the world you can create with old hardware. CPU limitations are the most constraining, especially with lots of AI and in open-world games. The argument goes that, especially if the game is targeting 60fps on last gen, the next-gen versions will invariably leave unused CPU headroom which could have been used to power more immersive worlds. GPU limitations are less constraining since differentials can be overcome by lowering resolutions and graphical options, while memory limitations can normally be overcome by squashing loading distances and cutting texture details. However, GPU differences can nonetheless relevant since developers of cross-gen games are less likely to choose a heavier engine which may compromise the last-gen version, but would deliver better graphics on the next-gen version. Yet in reality, it seems to me that historically we have seen early-gen titles use previous-gen technology regardless of whether they were gross-gen or not.

The third effect is also straightforward but is affected by the first two. If the game is available on your last-gen hardware, the urgency to go off and buy the latest machine is reduced since you now have an outside option to play it. Extra money earned by selling the game to PS4 users (1) is partially counteracted by fewer PS5 sales, and getting consumers aboard early is vital to give a system a strong start in the sales where momentum plays a huge part. Yet in a world where semiconductor shortages mean you’re already selling every PS5 you manufacture, this effect is completely academic. I think this has everything to do with the U-turn we've all witnessed. 

So is it a good or a bad thing?

I will say the same thing I said when MS was getting fucking roasted on this site by the Sony crowd for their cross gen strategy: It doesn’t really matter.

What next gen only games have we seen on PS5? Returnal, Demons Souls, and that car game with the shitty MTX? I think that’s it? Maybe Godfall, but isn’t it on PC? And what incredible mechanics or gameplay have we seen that couldn’t be done on PS4? Nothing. Everything just looks better thanks to better hardware and loads faster thanks to the SSD. The first year or so of a new gen almost always is just an extension of last gen. I’d expect it to last longer this gen because of COVID.

I also don’t think it will affect console sales much because all of these consoles are selling out quickly.

So if there was no COVID, Sony might have had a year one on PS5 with Horizon 2, Ragnarok, and GT7. Even Horizon, when it was revealed it was said that things like swimming and flying were meant to be in the first game but the PS4 wasn’t strong enough. Low and behold Horizon 2 is coming to PS4 and there’s swimming, and presumably flying? The cross gen effect is vastly overrated.

Nothing wrong with cross gen games.
The more people that can play the game the better.

The best approach is the middle one in my opinion. The fans want exclusives that take advantage of the new hardware, and the general customers want cross-gen games that they can play on their existing platforms. Sony is kind of doing that, but they are leaning toward a cross-gen approach far too much IMO. Games like Demon's Souls, Returnal, and R&C Rift Apart are important for the PS5, but they are not nearly as impactful as fully "next-gen" GoW or Horizon. With that said, Horizon is the most "next-gen" game I have seen, despite being cross-gen, so...

Microsoft got a backlash too when they announce that "all" of their games will be cross-gen. Which IMO is a mistake. They need a few games to show what the new hardware is capable of.

It depends. Is it a good thing for who? For the customer, having more options is always a good thing, so multiplats and crossgens are the way to go. For the platform holders, if they see they can get more money by doing crossgen releases despite maybe losing some of the hardware pushing factor, then it's good for them.

They did that with Ryse last gen. Next gen graphics don't always have to be built from the ground up with games. Showcasing next gen effects with better frame rates and higher clarity is just as good in many cases.

Playing a game from 30fps to 60fps with effects like Ray tracing etc is just as much mind blowing than building a game from scratch. The games still have to be good, not many care for just visual tech demos.

Supposedly the decision to make a PS4 version of GT7 was made recently. Will be interesting to see what kind of differences are in the two versions. It needs drastic AI and physic improvements, wonder if PS5 will do anything special there.

Sony is being moronic with their first party titles.  The purpose of first party games is sell hardware.  That's it.  That's the only goal.  Maximizing software revenue is stupid.  Why?  Because Sony makes most of their profits from license fees on third party games.  That is where the real money is, and they increase those profits by maximizing their hardware install base.  

The truth is that it's moronic even for Nintendo to try to focus on first party software profits, and a huge chunk of their revenue comes from first party software.  For Sony, it should be even more clear.  Their whole business model is based on getting huge third party software sales.  They need to make first party games that will sell hardware and that is it.  The large install base keeps third party developers happy.  On the other hand, if their install base isn't big enough, or grows too slowly, then third party sales are lower and they lose significantly more in profits.  On top of that, gamers end up wondering what "would have been" if the first party game had been developed solely for PS5.

Basically the upside to cross-gen is small and the downside is huge.  Sony is making a dumb move here.

What drastic physics improvements does it need? Curious since the physics are generally considered to be very good, at least by those that are playing the game daily and in E-Sports competitions. The AI is not bad either, just slow, ie you only get them to race you if you gimp your car. It's a relic of the 'everyone has to win every race' mentality. But generally the AI is too good at avoiding and making room for you, which leads to problems when people come into sport mode after 'training' with the AI.

What GT desperately needs is a racing school and racing license tests to teach people the basics about corner rights, track etiquette, one move rule and right of way. That together with a working penalty system that applies the rules (which should be handled server side) to turn the current arcade nonsense back into racing.

To the OP: It's a pandemic thing. Pandemic is bad, so I guess this is bad too. Yet trying to drive more people to buy what you can't produce fast enough, pointless.

I'm a customer 

As a customer, as much platforms are available the better 

I dont mind games development being held back a bit, it's not like I'm unsatisfied with the hardware of any of my current systems, even my entry level PC gives me a lot of satisfaction from the games I play on it so I want games to keep running on it

I actually don't like buying hardware, I'd rather buy one just when other stopped working. The idea of replacing a perfectly functional machine because of a perceived obsolence (i.e. there is a machine that costs 200 USD more than yours to play with a better graphics so you'd better hurry buy it) is one of the things that I hate the most about capitalism and gaming industry 

I will always applaud any publisher who releases cross gen titles, for the ones releasing next gen only... well hope I'm still interested in your game once (if ever) I buy a console to play it