Obsidian Entertainment shifts to new Fallout game after major studio layoffs

Obsidian Entertainment is developing a new Fallout game to replace a cancelled Avowed sequel, following major layoffs across Xbox and its studios. The shift represents a significant pivot in the developer's project roadmap, as Microsoft works to restructure its gaming division. The studio lost approximately a quarter of its staff in the recent redundancies.

Project Restructuring Following Layoffs

According to reports this week, Obsidian Entertainment—best known for Fallout: New Vegas—is now directing resources toward the untitled Fallout project. The decision came after Xbox and its parent company Microsoft implemented substantial cost-cutting measures across multiple studios. The cancelled Avowed sequel had already entered development before the strategic pivot became necessary.

Brandon Adler, a director currently working on an unannounced title at Obsidian, shared his perspective on the difficult period in a public statement. He acknowledged the challenge of "saying goodbye to some amazing developers" while defending the studio against criticism regarding its creative identity. Adler, who has worked at Obsidian for 13 years, stressed that key leadership remains consistent with the team's legacy projects.

Studio Leadership Defends Creative Continuity

In response to industry speculation about whether Obsidian has lost its creative direction, studio figures have emphasised the consistency of their core talent. Adler pointed out that many people in lead and director roles are the same individuals who worked on earlier acclaimed titles including The Outer Worlds, Pillars of Eternity, New Vegas, and Knights of the Old Republic 2. He described the "through line" from these projects to current work as clear and unbroken.

Adler criticised what he termed "cold take artists" offering unfounded commentary about the studio's direction without understanding the realities of game development or which staff contributed to past projects. He acknowledged that Obsidian has evolved over two decades but maintained that "the DNA at Obsidian is the same as it always was."

The Avowed Cancellation

The decision to cancel the Avowed sequel marks a significant shift for the studio. The original Avowed, released last year, was an action-RPG set in Eora, the fantasy world previously explored in Pillars of Eternity. The game featured first- and third-person perspective options, multiple character classes, and companions supporting players through combat and exploration across diverse environments. The sequel's cancellation has left players seeking similar gaming experiences to look elsewhere.