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Phantasy Star Online 2: New Genesis will be a standalone game, Sega clarifyNew game, same characters
New game, same characters

When Segaannounced Phantasy Star Online 2: New Genesisat Thursday’s NotE3 Xbox show, there was a bit of a kerfuffle over what it was. An update? An expansion? A brand new game? To help clear up any misconceptions, the publishers have put together a new “follow-up” trailer explaining exactly what New Genesis actually is - a new, spruced-up standalone release that will let you jump in with an existing PSO2 character.
Watch on YouTube
Watch on YouTube

Here’s the deal: New Genesis will be a new, standalone continuation ofPhantasy Star Online 2. Set 1,000 years after the base game, New Genesis takes place in an entirely new open world. Besides looking absolutely lush and proper massive, this new space will also feature weather effects and change with the time of day.
PSO2’s character creator was already pretty robust, but New Genesis will sport even more intricate customisation (wobbly fingers!). These characters will be compatible with the original PSO2, which is getting its own graphical update alongside New Genesis. New movement abilities, Photon Dash and Photon Glide, have also been added to help you traverse this space.
Since the gameplay seems to have been shaken up a whole bunch, character abilities and levels won’t carry over between games - units, MAGS and weapons might, but their usage and appearances are subject to change. A diagram near the end of the vid also suggests that most in-game currencies will be locked to their respective games, though premium currencies like Star Gems and Arks Cash will carry over.
I’d still have rather Sega just came out and said this was a new game, but there you go. Phantasy Star Online 2: New Genesis will be free-to-play when it launches sometime next year.