Character development, in the context of MMORPGs, unfortunately does not describe a process in which immature jerks grow up and develop some character. It only describes the process in which our playing pieces, our avatars, become numerically stronger. Note that it doesn't matter how exactly the mechanics of getting stronger are. Games where you gain experience points until you level up, and gain stats with each level, are probably the most common. But games where you gain skill points are still a form of character development. Square Enix announcing that their upcoming Final Fantasy XIV MMORPG will not have levels, but will work by you increasing the power of your weapon is also just a different guise of character development.
Character development is the defining feature of what is called role-playing games. If you read about some new real-time strategy game, "now with role-playing elements", that just means that your units will gain stats while playing, and you'll take the same units, now stronger, into the next battle. As many people remarked that there is no "role-playing" in the theatrical sense of the term in role-playing games, it would in fact be more accurate to talk of character development games, or even better, avatar development games.
As discussed in the chapter about challenge, character development creates the illusion of progress, of you getting better playing the game. There is some mob you couldn't kill before, and now, a few levels later, you can kill it. That makes character development extremely popular, and one of the major reasons of why we play.
Your stats getting higher, if seen in isolation, doesn't appear to be all that attractive. You have some value called "Strength", which went up from 110 to 120, and some value called "Damage", which went up from "93 - 123" to "101 - 134". So what? Where these stats become important is when you engage in the core gameplay, usually combat. The stats determine how likely you are to hit the enemy monster, how much damage you deal to it per hit, how much damage you can absorb, how many spells you can cast, and everything else. Your stats going up means you can more easily beat the same monster, or now beat some previously too hard challenge. Stats mean nothing in absolute terms, but are extremely important in relative terms.
Stats being relative means that there is no absolute limit. If people still will play World of Warcraft in 20 years, and Blizzard brings out a new expansion every 2 years, then in 2029 we will be playing with level 180 characters. And it is perfectly possible to predict what strength for example a level 180 warrior in WoW will have, unless Blizzard does some changes to the rules. There is nothing in the system which would make it impossible to imagine how this level 180 warrior will fight level 180 monsters, who will simply have increased stats as well. And of course in PvP he will face other level 180 characters.
Character development has different pathways. In most cases you get stronger by playing. In level-based games you earn xp by playing, which then make you level up, and your stats go up with the level. In some skill-based games your skill goes up with you using it. But there are also systems like in EVE Online, where your skills go up in real-time. Often your total stats are a combination of your base stats, plus the bonuses you get from equipment. Thus finding and equipping better gear is also a form of character development. In fact, level based games normally have a level cap, and finding better gear is the only form of character development left in the end game.
You probably thought my recent posts about microtransactions were not related to this "why do we play?" series, but in fact the comments people made about Free2Play games are extremely illuminating on the subject of character development. Two frequent complaints were A) at some point in a Free2Play game my character development in PvE slows down so much that I am "forced" to pay for items to accelerate it. And B) in a microtransaction game I can't beat people in PvP at the highest level if they outspend me. Both of these show how extremely important character development is to people. Even if it is just the leveling curve, which makes it take longer and longer before your character develops to the next level, this is already considered as being so unbearable that you *must* pay for items to develop your character faster. Simply developing slower is not considered an option. And in PvP the character that developed further will have a definitive advantage over an equally skilled but less developed character.
Note that this isn't actually a unique feature to Free2Play games; I personally did get stuck at level 42 in Everquest, and gave up after not gaining another level for over a month. A curious character and a "I wonder what happens if I do that" attitude do not mix well with a game with a harsh death penalty. And many, many players quit for example World of Warcraft after getting stuck in the end game, with their guild not advancing in the raid circuit any more, which means their character development by gear improvement had stopped. In PvP, players of Darkfall are complaining that they can't beat other players who leveled up magic by casting magic missiles at trees for hundreds of hours, before Aventurine fixed that loophole. In Dark Age of Camelot players complained that the Trials of Atlantis expansion allowed players to spend a lot of time gathering better gear there, and then beat people without Atlantis gear in PvP. Warhammer Online, regrettably, is going down the same slippery slope with the Land of the Dead. EVE is attracting new players at a slower and slower rate, because many people feel that they will never be able to catch up with the competition, who are years ahead of them in skill gains by real time. Whatever the method of character development is, be it time subscribed, time spent in game, or money spent, there is always some other player who spent more than you, developed his character further than you, and thus has an advantage over you, in PvE and PvP.
Thus some people have compared a MMORPG to a treadmill: You get the impression of constant forward motion, but as the challenges of both PvE and PvP are relative, and simply advance at the same speed as you do, you never really get ahead. Nevertheless, even as an illusion, the feeling of constant progress is a seductive one. The alternative, games in which you advance by getting better at playing the game, offer much slower progress. Character development is always pleasant, always gives you a rush, even if the reason why you gained that new skill was that you logged off and waited for a week, or the reason for your damage increase was that you bought a weapon for real money in the item shop, or you leveled up killing monsters that posed absolutely no challenge to you. Nobody ever questions whether he really deserved his character getting stronger for whatever he did to get there. But then happily moves to some game forum or blog to denounce players who chose a different way of character advancement, e.g. "welfare epics". Even if somebody else chooses exactly the same path of character development, he'll be criticized for either being more or less far on that path. Or as Rohan says, "Ever notice how anyone who plays more than you has no life? And anyone who plays less than you is not dedicated enough to deserve epics? It's amazing how you managed to hit that perfect balance."
So character development is certainly one big part of the answer of why we play. We play because playing advances our character, and then character development opens up new content to us, or gives us the illusion of having become better at beating old content. Everybody loves to win, loves success, and by introducing less strenuous pathways of winning, MMORPGs provide us with a constant high on the drugs our own brains emit to reward us for success. Character development is a key element which enables this constant stream of success.
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