Obsidian Scraps Avowed Sequel, Puts Fallout: New Vegas Director on a New Fallout Game
The shift comes amid Microsoft's broader Xbox "reset," which has already cost Obsidian roughly a quarter of its staff.
Obsidian Entertainment is dropping its planned sequel to Avowed and redirecting the studio toward building a new Fallout game, according to a Bloomberg report. The change is part of a larger shakeup at Xbox that Microsoft has been calling its "reset," an effort that has already meant layoffs affecting 3,200 people across the company, the closure or sidelining of certain studios, and a stated push to concentrate resources on "higher priority projects."
Josh Sawyer, Obsidian's studio design director, is set to lead the new Fallout title. That's a significant hire for the project: Sawyer directed Fallout: New Vegas, one of the most fondly remembered entries in the franchise, and more recently directed Obsidian's 2022 release Pentiment. According to Bloomberg, Sawyer had already been working on an RPG that wasn't officially a Fallout game but shared its structure and themes closely enough that pivoting made sense.
The cancellation list doesn't stop at the Avowed sequel. Bloomberg reports Obsidian scrapped "multiple projects" as part of this reshuffle. That's a notable loss given how the first Avowed was received and how far along its follow-up reportedly was. Bloomberg says development on the sequel was "going well" and that Microsoft would likely have announced it within the next year. Instead, it's being shelved in favor of a franchise Xbox hasn't touched in years.
That gap is part of what makes this move notable. Xbox hasn't put out a new Fallout game since Fallout 76 in 2018, even as the franchise has enjoyed a serious resurgence in the cultural conversation. The Fallout television adaptation was a hit, and it's already been renewed for a third season. Reviving the game side of the franchise now lines up neatly with that momentum, though Microsoft hasn't detailed timing or scope for what Obsidian is building.
Obsidian isn't abandoning everything else on its plate. The studio is still moving forward with Grounded 2, currently in early access, along with downloadable content for The Outer Worlds 2. But the Avowed sequel's cancellation and the pivot to Fallout show how directly Microsoft's broader restructuring is reaching into individual studios' creative roadmaps, not just headcount.
And the headcount cuts at Obsidian specifically have been steep. Kotaku reported that Microsoft laid off about 25 percent of the studio's staff this week. Xbox spokesperson Delaney Simmons declined to comment when asked about the situation.
What the reset has meant so far
Microsoft's Xbox reset has already reshaped the company's internal roster of studios and projects throughout this year, with layoffs and canceled titles becoming a recurring theme. Obsidian's situation fits that pattern: a studio with a well-regarded catalog, including Grounded and The Outer Worlds, now redirecting a major chunk of its output based on decisions made above the studio level about where Xbox wants to spend its money and attention.
The bet on Fallout suggests Microsoft sees more upside in reviving a dormant, proven franchise, especially one with fresh cultural relevance thanks to the TV show, than in continuing to build out a newer property like Avowed, even one that was reportedly on track. Whether that trade-off pays off depends entirely on what Sawyer and the rest of Obsidian actually deliver, and there's no word yet on when players might see it.
For now, the clearest signal is this: at Xbox, even a sequel that was "going well" isn't safe if it doesn't match where the company has decided its priorities lie.
