These LiveScream things seem to be a bit hit-or-miss. They were not only not scared, I'd suggest both players were downright BORED for 95% of the session. I feel the PT one was the best, and there have been some other good ones. This was the worst, but it's not much worse than some of the RE titles where they're really just playing the game. (To be fair, some of the jokes about the lame characters were good)
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The breathing must be super quiet to force you to crank the volume to make the monster attacks crazy loud.