Obsidian pivots to new Fallout game after Avowed 2 cancellation

Obsidian Entertainment is shifting focus from a canceled Avowed sequel to a new Fallout project. The change follows recent layoffs at the studio and a new strategy under Xbox leadership.

Obsidian, known for Avowed and The Outer Worlds, has canceled plans for an Avowed sequel. The studio is now working on a new Fallout game led by design director Josh Sawyer.

A WARN Act notice shows 52 employees were laid off from the Irvine, California office. This represents about a quarter of the studio's headcount amid broader Xbox cuts.

The Avowed sequel had been scheduled for a reveal within the next year but did not align with new Xbox CEO Asha Sharma's priorities. Bethesda will remain involved in the Fallout project while continuing work on The Elder Scrolls VI.

The move comes as the Fallout TV series remains popular on Amazon, though Fallout 5 has no announced timeline.

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Microsoft executive responding to media about Xbox layoffs in a corporate setting.
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Microsoft responds to conspiracies over Xbox layoffs

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Microsoft's communications lead addressed claims that recent Xbox layoffs aimed to replace American workers with foreign hires. The company cut over 3,000 positions to restructure the division.

Obsidian Entertainment is cutting 60 to 70 positions, roughly a quarter of its workforce, as part of broader Xbox restructuring announced earlier this week.

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Bethesda has stated that recent staff reductions at its studios will not alter the development timeline for The Elder Scrolls 6. The company responded to questions raised after earlier reports suggested potential delays. This comes amid broader changes at Xbox-owned teams.

Microsoft is set to begin layoffs across its Xbox division on July 6. The plans reportedly include closing Arkane Studios and canceling the Blade game.

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A new report has described an atmosphere of uncertainty and fear among remaining staff at Xbox following recent restructuring by Microsoft.

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