Bethesda
Microsoft’s Xbox division has reportedly canceled multiple projects at Obsidian Entertainment, including a planned sequel to Avowed, as the studio shifts its focus toward a new Fallout game following widespread layoffs across the company.
The reported changes come after Xbox CEO Asha Sharma announced plans to cut 3,200 jobs and divest five studios as part of what she described as a “reset” of the business. The strategy includes placing greater emphasis on Xbox’s biggest franchises, with Fallout now set to become a major focus.
According to Bloomberg, Obsidian, which is owned by Xbox, laid off around a quarter of its workforce during the restructuring. Alongside the layoffs, the studio canceled several projects, including an unannounced sequel to 2025 RPG Avowed.
Obsidian shifts from Avowed to Fallout
Bloomberg reports that studio design director Josh Sawyer will now lead development on a new Fallout game, with Bethesda Game Studios working alongside Obsidian on the project.
Sawyer previously directed Fallout: New Vegas, the 2010 RPG that remains one of the franchise’s most popular entries. Before the restructuring, he had reportedly been leading development on a separate role-playing game that shared structural and thematic similarities with Fallout but was not part of the franchise.
Obsidian Entertainment
According to the report, Obsidian had planned to build on Avowed by producing a sequel that would use the existing world and technology from the original game. Development was said to be progressing well, and the sequel was reportedly on track to be announced within the next year.
However, the project ultimately did not align with Sharma’s broader strategy for Xbox. While the sequel has been canceled, some developers are expected to remain attached to the project while waiting for new work, including Fallout, to ramp up, leaving open the possibility that it could eventually be revived.
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Obsidian will also continue to support The Outer Worlds 2 with downloadable content and will remain at work on its multiplayer survival game, Grounded 2.
The Fallout series has not received a brand new mainline entry since Fallout 76 launched in 2018, as Bethesda has focused on other projects while continuing to update the online RPG. According to Bloomberg, Bethesda will work with Obsidian on the new Fallout title as Xbox invests further in one of its largest gaming franchises.
Earlier this week, the company confirmed plans to cut around 3,200 jobs through the next fiscal year while spinning off or selling four studios as it shifts resources toward its biggest franchises.
Xbox CEO Asha Sharma said the changes are part of a broader “reset” designed to streamline the business and prioritize long-term investment in series like Fallout.
