Obsidian cuts 25% of staff, kills Avowed 2, and pivots to a new Fallout game
Obsidian Entertainment has laid off roughly a quarter of its workforce and cancelled the sequel to Avowed, its 2025 action-RPG, as part of a broader Xbox restructuring. A California WARN notice confirms 52 employees were let go — about 25% of the studio's headcount. According to Bloomberg (Schreier), Obsidian is now pivoting to develop a new game set in the Fallout universe.
The reset
Xbox CEO Asha Sharma has been narrowing the publisher's focus to what she sees as its strongest franchises: Fallout and The Elder Scrolls. Projects that don't fit that vision are being cut. Avowed 2 was far enough along to have been eyeing a 2027 announcement, but it didn't survive the cull — nor did several other unannounced Obsidian titles.
The new Fallout project is being led by Josh Sawyer, who directed Fallout: New Vegas in 2010 — still widely considered the franchise's best entry. Bethesda, which owns the Fallout IP, will collaborate on the game. That's a notable arrangement: Obsidian and Bethesda have a complicated history, and New Vegas was the last time the two studios worked in the same universe.
Early days, real momentum
The project is still early. Kotaku reports the strategy is described internally as "emerging" and could still change — no formal concept has been locked. The scope is also undefined: it's not yet clear whether this is a full Fallout 5, a spin-off, or something else entirely.
The timing makes sense regardless. The Amazon Prime Video Fallout series drew over 100 million viewers and reinvigorated mainstream interest in the franchise. Fallout 76 launched back in 2018, and Bethesda's own Fallout 5 won't arrive until after Elder Scrolls VI — likely not before 2030. That gap is exactly the kind of opening Sharma is trying to fill.
What Obsidian keeps working on
The studio isn't going dark on everything else. Development continues on post-launch content for Grounded 2, and a DLC for The Outer Worlds 2 is still in the works. But the Pillars of Eternity universe — home to both Avowed and its cancelled sequel — appears to be on ice for now.
For fans of New Vegas, Sawyer's involvement is the clearest signal yet that this won't be a safe, by-the-numbers entry. Whether that promise survives the corporate machinery around it is another question.
