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Imagine if, when you bought a new book, it actually came with four books inside it. It's four copies of the same book, but written for three different reading levels -- from very simple to very verbose and descriptive. Am I mistaken for thinking that the book-reading community would roundly reject this terrible idea? It's hard enough to write one good book, and most who read books understand this. They would likely want to know: which of these (if any) is the good one?
Difficulty modes are variants, for our purposes. I sense that, while difficulty modes have always existed, there may be some small but growing percentage of us in the game design community that have started to distrust the concept of difficulty modes.
I mentioned the problem of "which is the real game", and nowhere is this problem more prevalent than with difficulty modes. When I start up a new game, I don't want to play the version wherein they just tuned the numbers arbitrarily downward to make it easier, and I don't want to play the version wherein they did the opposite to make it harder. I want to play the balanced difficulty game that they carefully tuned and designed.
But let's say you work hard to make your different difficulty modes actually different, by changing AI patterns, number of enemies, what types of power-ups appear, etc. In this case, we're really talking about a different game, and so we're back to the "Three-in-One Fun Pack!" problem. It doesn't help anyone to have more mediocre games.
In short, avoid difficulty modes if at all possible. If you're going to have difficulty modes, have a very small number of them (preferably two) and label them clearly. Perhaps you want an "introductory" skill level for players who are just starting; this is understandable. Consider naming that "Easy Mode" and the normal game "Normal Game," for clarity.
The same thing goes for creating a harder mode -- the important thing is that your players can tell which is your "balanced difficulty", and which is a variant. Sure, plenty of games already have a "normal" difficulty setting, but until developers adopt the position that one of these games is their "real" intended game design, we, the players, have no way to know which of the difficulty modes it is. I think we've all played a game where "Hard" felt like the version that the developers intended (the recent XCOM comes to mind).
It may seem that I advocate for some kind of anti-mod position, but that's not the case at all. Mods provide tremendous value to both the community and the developer, and sometimes the mod can even outshine the game that's being modified. One of the most famous cases of this was with Counter-Strike, which was a mod for Half-Life; another being the Defense of the Ancients mod (DOTA) for Warcraft III. It's arguable that both of these games had a larger, more lasting impact on the world of games than either of their base games did -- which is saying a lot, in this case!
So, obviously mods -- basically, user-made variants of games -- are incredibly important. Developers have known for years that making sure that mods are easy to make is a very important part of game development. I agree with this commonly held wisdom.
In fact, developers can go further with this than they already do by "sponsoring" some of the best mods. A beautiful thing, which has happened a few times before, is when a team makes a mod that's so fantastic and popular, that the development team formally endorses that mod. There have even been cases of these mod teams being hired or becoming a small offshoot of the original company.
But what we haven't seen yet is a kind of institutionalizing of community mod embracing, so much. Some games are starting do this, but not all of those are necessarily doing it in the right way.
Some developers have gotten the idea that it would be cool if the community can create things that actually get regularly added to the base vanilla game. While this is certainly exciting for the users, who get to get their 15 minutes of fame for a bit of content they created, this is a disastrous premise for the games themselves.