Microsoft's ongoing Xbox restructuring is bringing major changes to Obsidian Entertainment. According to Bloomberg sources, the studio has canceled several projects, including a sequel to Avowed, and will instead focus on developing a brand new Fallout game.
Sources say roughly a quarter of Obsidian's workforce has been laid off as part of the restructuring. The studio has also shelved the planned sequel to 2025's RPG Avowed along with several unannounced projects.
Studio design director Josh Sawyer is expected to lead the new Fallout title. Obsidian will develop the project alongside Bethesda Game Studios, which continues to oversee the franchise. People familiar with the plans said the project is still in its early stages, meaning its direction could change.
Before this shift, Sawyer had reportedly been leading development of a role playing game inspired by Fallout in both structure and themes, though it was not part of the franchise itself.
An Xbox spokesperson declined to comment.
The changes are part of Xbox CEO Asha Sharma's broader organizational "reset." Earlier this week, Sharma announced plans to cut 3,200 jobs and divest five studios while increasing investment in Microsoft's largest gaming franchises, including Fallout.
Although Fallout remains one of Xbox's biggest brands, the series has not received a brand new main release since Fallout 76 launched in 2018. Bethesda has continued supporting Fallout 76 with regular updates, and the game has now surpassed 23 million players.
The only Fallout game released over the past two decades that was not developed by Bethesda was 2010's Fallout: New Vegas. Developed by Obsidian under Josh Sawyer's direction, the game later became one of the franchise's most beloved entries.
Bloomberg also reports that Obsidian released three games last year, but two failed to meet internal sales expectations. The studio hoped to quickly build on Avowed by producing a sequel using its existing world and technology. Development was reportedly progressing well, and the project was expected to be announced within the next year.
However, the sequel ultimately did not align with Xbox's new strategic direction. Some developers will continue working on Avowed related content while waiting for larger projects, including Fallout, to ramp up, leaving open the possibility that the sequel could eventually return.
Obsidian will also continue producing downloadable content for The Outer Worlds 2 while maintaining development of its multiplayer survival game Grounded 2.
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