Having played my fair share of horror games in my time and enjoyed them thoroughly, the one game/experience that sticks out to me the most, other than the original Silent Hill trilogy, is Fallout New Vegas' 'Dead Money' DLC, which has honestly stuck with me as one of the most genuinely memorable and engaging gaming experiences I've ever had. I know that a lot of people have very different feelings about Dead Money (I once read a comment on YouTube that compared Dead Money's gameplay to hammering nails into his penis), but for me personally, Dead Money is an outstanding horror experience, which comes down to three main facets.
1. The gameplay.
In regular FNV, it's honestly rather difficult to feel scared or vulnerable, due to how generous the game is with level-ups and weapons/armor/items; after just a few levels and a moderate amount of scavenging around, it's easy to develop a character that can take on the majority of the game without much difficulty, and that's not getting into just how OP you can become when you really push it.
Dead Money, on the other hand, does a remarkably good job of making you feel weak and vulnerable, no matter how far you along in the game or how good you are. At the very start of the DLC, every bit of gear you have is stripped from you, forcing you to scavenge for every last bullet and stimpak you can find. The Sierra Madre itself is built in a claustrophobic, maze-like manner that makes it all too easy to get lost and confused, and the Cloud that hangs throughout the place makes visibility nigh-impossible (among other problems the Cloud causes you.) Almost all the enemies you face are either unkillable or require an extra bit of effort of make sure that they're dead, forcing you to either avoid them or expend that much extra armor/health to take them down. Even beyond the enemies, the Sierra Madre is littered with booby traps and other threats to your health (the Cloud, the radio signals) which oftentimes force you to simply run for your life in order to get to safety. Even the companions, who are as trustworthy as can be in the vanilla game, can and will turn on you if you say the wrong thing.
2. The Story
The story of Dead Money is told on two levels, through not only the notes and records left behind from the construction and opening of the Sierra Madre, which explains why the Sierra Madre is the broken down horror that it is, but also through your interactions with your companions and the man who's forcing you to break into the Sierra Madre. It's difficult to really talk about the story of Dead Money without going into heavy spoiler territory (and I don't want to spoil this game's story at all for anyone who hasn't played this game before–you really should experience it for yourself), but it's a story of greed, of obsession, of spite, of revenge, of love, and of people not letting go and paying the price for it.
3. The Atmosphere
What ultimately cinches Dead Money's status as a masterpiece of me, personally, is the utterly unnerving atmosphere of the game, which I think is some of the finest seen in a horror game other than the Silent Hill games and maybe Amnesia the Dark Descent. It's the little things, really, that combined together that make the Sierra Madre feel less like just an abandoned casino populated by mutants and technology run amuck, and more like a truly malignant location haunted by its past. Messages from the long dead scrawled onto the walls, taunting you or apologizing for you being there or telling you to RUN RUN RUN. Gas mask clad abominations that hunt you with spears and bear traps and gas bombs that can only be killed by slicing/shooting/blowing their limbs off to reveal the gelatinous contents of their bodies.
made up of hundred year old sirens and distorted singing from a woman centuries dead. A companion who casually threatens your life and talks about wearing your severed arm around his neck and that, remarkably, isn't the most dangerous person by your side. The villain, an insane and twisted old man who's thrown however many lives away in search of his obsession and will do the same to you without a second thought. A bell at the Sierra Madre police station suddenly ringing out into the silence, without any hint or clue as to what made it go off. A hospital room full of headless corpses. An invitation to come to the Sierra Madre that's actually been a cry for help this entire time. Like I said, it's the little things.
With all this in mind, I feel that Dead Money is one of the best horror experiences that can provided by a computer game, and one that should be experienced at least once.
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