Obsidian Shifts to New Fallout Game Following Xbox Restructuring

Obsidian Entertainment is shifting development resources to a new Fallout game following a major corporate restructuring by Microsoft. Outlets including Bloomberg, Kotaku, IGN, and GameSpot reported the strategic pivot, which also places Obsidian under the umbrella of Bethesda Game Studios.

Why is Microsoft restructuring Xbox and Obsidian?

Microsoft's Xbox Game Pass strategy has faced challenges, prompting an Xbox "reset" that includes studio restructuring and resource consolidation around major franchises like Diablo, The Elder Scrolls, and Fallout, according to reports from Kotaku, IGN, and Bloomberg. As part of this corporate shift, Bloomberg reported that a quarter of Obsidian's staff was laid off.

What is happening to Avowed 2?

Obsidian has pulled the plug on a planned sequel to Avowed in favor of the new Fallout project, according to IGN. While IGN reported that Obsidian scrapped plans for Avowed 2 and other unannounced projects, the outlet also noted that a small group of staff will continue working on Avowed 2 with hopes of reviving it later. Kotaku noted that a September 22, 2026, blog post by Microsoft Chief Content Officer Matt Booty did not mention an Avowed sequel, though Obsidian had previously planned to work on one.

Who is leading the new Fallout game?

The new Fallout game is being led by Josh Sawyer, the project director and lead designer on Fallout: New Vegas, according to IGN. IGN reported that Sawyer had previously been working on a different RPG structurally similar to Fallout before the studio redirected its efforts.

What projects are continuing at Obsidian?

Matt Booty wrote in his September 22 blog post that Obsidian's work on current projects, including Grounded, will continue. Additionally, future plans include remasters of Fallout 3 and New Vegas, as reported by Kotaku.