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I for example don't find the game to be graphically top of the class, which these games actually used to be. GT or Forza were always top notch when it came to graphics and sounds (Forza at least soundwise), now we have racing games with better sounds (R3E), better visuals overall (not saying every aspect) (PCars2 or AC on PC on Ultra).
They're about as good as they ever were. FM7 and FH3 are good looking games on PC at Ultra, and I think many would consider them better looking than AC. Personally, I think they're on par with every other major racing game graphically with the exception of GTS, although GTS makes some trade offs to look as good as it does.
There was even a time when Forza and GT physics were regarded as actually good simulator physics. This time is also gone.
Yes and no. They were always second tier simulators at best, even in their prime. Since we're including PC games, there were a lot of PC games that were available through 1995-2005 that had unquestionably better physics, but their popularity was low. The general assessment of their physics was about what it is now; pretty good albeit somewhat simplified.
So what i think is that it's not a problem of the formula of these games, it's a problem of their quality. Competition got bigger and better while Forza has not improved within the formula. GT Sport tried and it was somewhat successful i'd say. But still, people want a real GT game.
Compared to most, FM7 doesn't really have a quality problem. It's not perfect, but it's not Aliens: Colonial Marines, it's not Battlefront 2 with it's aggressively unfriendly design, it's not even really as bad as GT5 1.01 (which most people forget was vaguely horrendous). It doesn't have showstopper bugs, it doesn't lock half the game behind microtransactions or a grind wall, even it's design "flaws" are largely things that are understandable but in practice sub-optimal.
It's a game, it does what it tries to do, it's the seventh iteration of roughly the same game. It's polished but mildly lifeless.
As far as competition, like I said, it doesn't have competition any more. FM7 stands alone as the single title available if you want the caRPG type gameplay. It dominates it's market segment just by existing. Arguably it's market segment isn't that popular any more as people have found other racing types that they find to be more fun (see: Horizon) but there's not really anything else out there that you can buy that does what Forza Motorsport does. At least not in the sense that things like GT5 and FM4 or GT4 and Enthusia were competing with each other.
GTS was mildly successful (but almost certainly less so than Polyphony or Sony would have liked), but it's the iRacing formula not the Gran Turismo one. As successful as that game type may be, and I hope that Polyphony and other companies continue to push it because I think it has potential, it doesn't replace the traditional Gran Turismo gameplay. At best there's mild overlap, but not really. Arguably games like pC2 are closer in spirit to GT6 than GTS is in that at least they're still running the zero-to-hero model.
I agree that the formula could do with a kick to keep going. Horizon was a good idea, and Motorsport wants something similar that will let it keep it's motorsport roots but integrate that investment and sense of place in the world. Other games have tried casting the player as a racing driver or team manager, and it sort of works and sort of doesn't.
Personally, I think it should lean more heavily into the history and knowledge angle. I love it when they have little interviews with motoring personalities while loading. I think rerunning classic races or events is cool. I think you can turn such a game into a great experience by putting more links to real world stuff and using the unique strengths of the video game format rather than turning it into a glorified encyclopaedia like museum cards. Ain't nobody thinks museum cards are good gameplay. Don't show us stuff, let us do it ourselves.
Vision GT was also a good idea in showcasing the future of car engineering, but it was horrendously mishandled. I think if it were more closely defined and managed, it could be both a great advertising opportunity for manufacturers and a great gameplay addition for players. Give the manufacturers a set of costs and constraints for a saleable car design in 2030, have them design it, and then have some content where the cars actually get critiqued in meaningful ways. Don't let them make laser cars, don't let them use unobtainium, don't let them violate the laws of physics. And don't let them see each others designs before putting them in the game, or it turns into a willy-waving contest.
The first few VGTs were good, and then it turned into silliness. I think Turn 10 could take the idea and improve upon it.