Microsoft pushes Obsidian toward Fallout after canceling Avowed 2!

by L.W. and Ann Marie Barker

Obsidian Entertainment is reportedly undergoing a major creative shift as part of a broader Xbox “reset” focused on prioritizing core intellectual properties. The move follows Microsoft’s latest round of layoffs, which reports say also affected id Software, the studio behind Doom and Wolfenstein.

Obsidian is now reportedly redirecting development resources toward a new Fallout game. That change has allegedly led to the cancellation of several projects, including a planned sequel to its fantasy RPG Avowed.

Layoffs reshape Obsidian’s roadmap

According to Bloomberg’s Jason Schreier, the new mandate comes amid significant downsizing at Obsidian. Kotaku reports that the latest corporate cuts reduced the studio’s workforce by roughly 25%, forcing changes to its production slate.

Before the intervention, Avowed 2 was reportedly moving forward smoothly, with an official reveal expected sometime next year. Those plans are now said to be shelved, along with several unannounced projects.

Fallout becomes the new focus

With a smaller team, Obsidian is reportedly shifting its attention to Fallout’s post-apocalyptic universe. The project’s relationship to Bethesda’s long-anticipated Fallout 5 remains unclear, but its reported creative lead has already drawn interest.

Josh Sawyer, Obsidian’s studio design director, is expected to lead the game. Sawyer is widely respected among RPG fans for directing 2010’s Fallout: New Vegas, often regarded as one of the franchise’s strongest entries.

Schreier also reports that Sawyer had recently been working on an unannounced original project with a structure and themes similar to Fallout, though it was not tied to the IP. It remains unknown whether that concept is being folded into the new Fallout project.

Existing commitments remain active

The shift aligns with recent messaging from Xbox leadership and Bethesda president Jill Braff, who have emphasized investing in tentpole franchises. Even so, Obsidian is not abandoning every existing commitment. The studio still plans to support Grounded 2 in early access and develop downloadable content for The Outer Worlds 2. Some staff are also reportedly keeping limited work on Avowed 2 alive in hopes the project may eventually resume.