The Souls series and its imitators have a pretty consistent formula for their stories and lore that generates a cool “story-sense” for games about exploration without straightforward cutscenes, but the formula has a particular weakness too.
The first setup is that there’s a great kingdom, or town, or space station, or so on that has a rich history, and many geographically distinct areas. This kingdom was usually great because it relied on something dangerous, like souls, the first flame, or the blood of the great ones.
Some horrible tragedy befell the kingdom long before the events of the game take place, thrusting the kingdom into ruin and abandon. Usually this is connected with the source of what made the kingdom great in the first place, and a core fact about the setting of the game. This tragedy can be a plague, invasion by the supernatural, the fading of the flame and curse of the undead. Regardless, the lives that people knew have been abandoned, leaving behind empty buildings and houses that are now occupied by unintelligent remnants of people and intelligent scavengers drawn by the allure of treasure, personal fulfillment, or seeking something important in the ruins. This explains why there are so few people around, leaving you in isolation to explore, in the absence of a plot driven by a cast of sapient people who cooperate/fight with each other, make decisions, and change things about the world in cutscenes, leaving the player to explore the world in peace and isolation.
Your character is set on the task of confronting the source of the tragedy and setting it right. At the beginning of the game, they are presented with basic information about the nature of the tragedy (the flame is fading, resulting in undead, gotta light it again; there’s a crazy plague that drives people mad, time to go on the hunt again; hollownest has been overrun by an infection that makes bugs mindlessly violent). In the process of exploring the world, they learn that the nature of the tragedy isn’t as it appears (the gods want to continue the age of fire because they’re afraid of the darkness in humanity and the possibility that humanity might seize that power for themselves; The plague is caused by the healing blood, which is the blood of great old ones who manipulated everyone involved to exert influence over the world; the infection is actually a long-forgotten god trying to be remembered and worshiped again) and that the means of dealing with it are deceitful and take advantage of the willingness of the player character (to light the flame again, you need to use yourself as an offering; Your complicity in the hunt is the will of yet another great old one attempting to find a surrogate child).
And this naturally creates a strong foundation for a setting. Bits of lore can be scattered about how the world was affected by the calamity that brought the kingdom low. Places outside the kingdom can be hinted at. The thing that the kingdom was built on can be exposited on how it interacted with the calamity, or the way the kingdom is built, or so on. Different survivors scavenging the ruined kingdom can all have their own reasons for what they’re seeking in this doomed land, which forms the basis of sidequests and NPC interactions. Clues can be dropped about the true nature of the calamity, and the means of solving it.
So when doesn’t it work? Dark Souls 2 and 3 demonstrate when it doesn’t work. You can’t do a direct sequel in the same setting with the same formula. The problem is it stretches the credulity of the setting to have multiple kingdoms stacked on top of each other, all rehashing the same core secrets of the world, the same setting information, the same cause of all the core problems. It needs to be a fresh setting every time, or the sequel needs to deal with something other than the recurring calamity that wipes everyone out. You can’t use the same calamity (or a reoccurrence of the same calamity), because then players already know what the root cause is and the core mystery of the world, they aren’t discovering new things about the setting, they’re rediscovering old things, so everything feels like a stale rehash of something that already happened. The twist of Dark Souls 1’s ending is that even though you sacrifice yourself, the fires will eventually fade again in a cycle. And the sequels repeat this twice, and repeat alternate endings where you create a world of dark twice (assuming that the throne of want is really a fire lighting thing again, its function is never really clear). Dark Souls 3 especially begs the question of how the hell there was ever a peaceful time to build a kingdom in this land filled with like, 5 people who all linked the flame, presumably going through their own undead plague at some time or another, in a kingdom that is literally built on top of lordran, and for some reason has a living prince despite being in complete ruins and ancient monsters roaming around everywhere.
If a Souls story is to have a direct sequel, it needs a new thrust, with new narrative conceits and a new inciting incident that isn’t another calamity, yet represents something that needs to be dealt with that is somehow a core mystery of the world. It could be dealing with the fallout of the resolution of the previous game, or some type of new threat. Perhaps the world is left destabilized from solving the old calamity and is now crumbling and you need to restabilize it, but the crumbling actually means there’s the possibility of making something new from the world. The underlying mystery can’t be the same thing as the prior game, but it still needs to be a source of problems to be dealt with by going on a big quest in a forsaken land.
That or just start fresh each time, save yourself the hassle.