Microsoft Redirects Obsidian Entertainment to Develop New Fallout Game

Microsoft is redirecting Obsidian Entertainment to develop a new, mainline single-player Fallout game led by studio design director Josh Sawyer, who previously directed Fallout: New Vegas. This shift is part of a broader "big reset" of the Xbox division under CEO Asha Sharma, aimed at prioritizing high-impact, commercially successful franchises to capitalize on the brand's popularity following the Fallout television series.

To facilitate this pivot, Microsoft cancelled several of Obsidian's active projects, including a sequel to the RPG Avowed and other unannounced titles. While reports suggest the Avowed sequel was halted, some staff continue to work on it in hopes of a future revival. Obsidian continues to develop Grounded 2 and downloadable content for The Outer Worlds 2. The new Fallout project will be developed in collaboration with Bethesda Game Studios, which will oversee the project while focusing its own primary resources on The Elder Scrolls 6.

This strategic realignment follows a significant downsizing effort at Xbox, which saw the layoff of approximately 3,200 employees across the division and its studios, including Id Software and ZeniMax Online Studios. Roughly 25% of Obsidian's workforce was affected by these cuts. Additionally, the restructuring led to the divestment of five internal studios.