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Seasonal mode has been in Diablo for over 2 decades aka in previous games. The other games didn't have season passes etc but still existed. So I don't think Season mode was created for the reason you're saying but it does benefit them more now as the Season pass can only unlock tiers on season mode.
Season mode is mainly about adding a new theme that totally changes character builds and lets them change things up and make non meta builds powerful all of a sudden with a new mechanic that's unique to that season as an example. It's mainly to keep the game fresh.
Yet season mode existed in the older games that didn't have battle passes?
Wow, we truly are living in the worst timeline.
Diablo 3 was the first game to call them "seasons" but they didn't have themes and new mechanics until after the Reaper of Souls expac, and even then not until season 4 or 6, I forget exactly when. It started off as mild stuff like the double treasure goblins and eventually became more interesting mechanics, inspired by but never lived up to Path of Exile's seasonal content. You'd unlock cosmetic pets and wings/armor/portrait frames for doing the seasonal objectives.
D4 is handling them like 3 but hit the ground running sooner, and the season pass/battlepass has a lot more stuff on it than D3 did. D4's cosmetics aren't as good because it's harder to show them off; it's neat to pick alternate tombstones for when you're dead, but you shouldn't be dying around the people you want to show off to. The town portals are cool, but extremely minor in the field/open world, and only party members can see your portal in town. D3's pets were both cool if rare, and functional because they'd pick up money(and now blue/yellow items and salvage them for you), wings and backpieces were bold and obvious. D4's mounts are okay, but you often don't know which have cool particle effects or what, so those are undersold as a show-off factor. Armors are hit-and-miss, depending on the design or particle effects/glowy bits. D3 had smaller groups of players, but you'd see characters in menus when inspecting profiles, the clan roster, inspecting player profiles from gen chat & leaderboards. D4 should've copied what worked from 3 and didn't, really striking how badly they need to catch up. People won't buy the stuff to show off with if there's no way to show it off or social tools to make a gallery of your cool character setups.
To return to the original question, "Why do seasons exist," it's to shake the game up and keep it fresh with new mechanics and themes, because it's fun to level again with other players and take on new content & challenges. If you prefer to stay at level 100 with a year old character in the base game, you can but that's the minority of players. Most people play seasons because it's current and so they don't feel outclassed by old characters with full gear already. Path of Exile does a good job(usually) with new gameplay modes and mechanics in their seasonal additions, and also used it as a proving ground for adding more permanent content to the base game if the playerbase really liked it, which D4(and D3 at the end) is now copying. Selling FOMO cosmetics that coincide with the seasonal content is a happy accident for the devs to ask for more revenue. You don't have to do it.
Damn, I wanna see your good timelines.