How many times have you quit playing a game because you lost? How many times have you quit a game because you won?
The first is rarer than the second, right? We view defeat as motivation to improve and try again, while often times victory is indeed followed shortly by ‘game over’, both figuratively and literally (I may not be using those words correctly, some English major feel free to correct me).
As games transition away from a product model and more towards a service (which IMO is a great thing, but that’s another topic), it becomes more and more important not just to get someone to try/buy your game, but for them to KEEP playing/paying, be it a monthly sub or DLC purchases.
Tie these two things together, and its interesting that so few games really push or focus on defeat. Dark Souls is of course an excellent example, and I’d put games like Civilization with its long list of difficulty levels here as well. A game like LoL has basically infinite difficulty, because as you get better, so do the players you play with/against, and I think that is a HUGE contributor to that games amazing sustained success.
In the MMO space the exact opposite push has happened in many games; defeat is almost impossible in WoW today outside of very specific content (non LFR raids for example), and the leveling game in almost all MMOs is borderline trivial. The strategy in the MMO space is not to defeat you and focus on improvement, but rather to stretch the road out so instead of 40-60 hours of content, you plow through thousands of hours. The flaw here is once you have been through one such road, you more or less know it, and so you won’t be as excited to repeat a similar process in a different flavor or theme, and I think this is a major reason why we are seeing an overall decline in MMO interest.
One of the themes the PvE Sandbox MMO Design tab touches on is the concept of the players fighting an ever-increasing, and ultimately ‘impossible’ battle against the world. The main reason I think this would be successful is players of all levels push themselves to improve, and we like seeing that improvement. Easy example; we all like the feeling of finding a really powerful item, and the short-term effect of being able to easily handle something that was more difficult prior to finding that item. But long-term, if said item has now trivialized a lot of content (or worse-case, made everything too easy), that item is a net-negative to the whole experience.
The solution isn’t to remove the item, but rather to allow the game to escalate the difficulty until, even with said item, you are challenged. And by challenged, I mean defeated until you again improve. Fallout 4 is a great example of this flaw. When you find a great legendary weapon with crazy DPS, its a great feeling. Its also great fun to use it the first few times and melt enemies. But long-term such a find trivializes the game, and you are left with the option of either not using the item, or starting a fresh game. Wouldn’t it be better if instead the game was able to handle such a find, and keep you challenged?
Hardcore Casual 
The premiss for your argument requires that most people are of the type that is spurred on by loss due to a wish to overcome the barrier. Unfortunately most people dont work like that, a very large group of people will simply quit a game if they lose, rather than be encouraged to become better and beat it.
I have no doubt that it is actually true for you (as it is for most people who get really good at games) and I would have guessed so before reading this article as well, but the mentality is not as widespread as your opener suggests. Demotivation from defeat is rather common in most avenues of life, and I would imagine it to be so in games as well. Especially amongst the crowd of people who play games for relaxation.
I think this is generally true, and is something even people would THINK is true for them (“I quit when I lose, trust me!”), but I bet if we had some actual study of it, the results would be surprising.
I say this not just based on personal experience leading groups in games, but also based on success of different games as well. Losing happens all the time in LoL, but its the #1 game out right now and has been for 2-3 years now. Back when WoW was ‘harder’, it was growing. When ‘accessibility’ was focused on, subs started to stagnate and drop. There aren’t a lot (any?) mods for games like Skyrim or Fallout that make them easier (directly anyway), but there are a ton of VERY popular mods that make them much harder (darker nights, survival requirements, etc). I’m sure if I continued to think on it, I could list more examples.
What I am trying to say is I agree it might not be smart to market a game as “It will make you lose a lot” (though this basically worked amazingly well for Dark Souls), but that if you made a game (using the service model) that did push people to improve and had a gradual but always persistent difficulty curve, it would retain and entertain people better than an equal game with a set or stagnant difficulty level.
” Losing happens all the time in LoL, but its the #1 game out right now and has been for 2-3 years now. Back when WoW was ‘harder’, it was growing”
#1 game based on what? Total revenue? Raptr? I’m unconvinced that more people play LoL than play Candy Crush, but obviously no one who plays Candy Crush has Raptr installed.
The problem with WoW, imo, is twofold: 1. Its content is less repeatable than LoL, 2. As it got easier, it fell into the uncanny valley of video game difficulty. Too difficult and time consuming to attract the casuals, too easy to attract serious gamers. 3. It got kinda shitty as the top tier developers left. Of these 3, number 2 is the one that’s broadly applicable across all your examples.
This is why your answer to Shandren is incomplete, because quoting Wow’s decline and looking at mods to Skyrim doesn’t take into account the topography of the gaming population with regards to this uncanny valley–which means your answer is perfectly correct but only addresses the ‘hardcore’ segment of the gaming population. However, Shandren is still incorrect overall–your premise, and therefore your entire post, is correct no matter which side of the uncanny valley you look on:
“The premiss for your argument requires that most people are of the type that is spurred on by loss due to a wish to overcome the barrier.”
They are. Even Candy Crush and Solitaire, two of the easiest and most mind-numbing games around (and most widely played by the “grandma” player), still have the player lose much more often than they win.
*I use hardcore vs. casual above solely to distinguish between those who want hard games and those who want easy games. I believe this definition is most useful as it seems to be static over time. People change their available time for gaming as their life situation changes, but it seems like people stay relatively constant in their desire for difficulty level.
Sorry to be all OT, but when are you starting a Dungeon Boss guild? The update just dropped and added that feature.
Making a CoC and DB post later today, but the DB guild is up: Inquisition.