Xbox reset hits Obsidian, as development shifts to new Fallout game with Avowed 2’s cancellation

The Xbox reset that brought major changes to multiple studios has also affected Obsidian. The studio, which was expected to be safe from the reshuffling, is also going through layoffs and reorganization, along with switching development from a sequel to a not-so-popular 2025 title to a new Fallout game.

The information comes from insider Jason Schreier, who, in the latest Bloomberg article, explained that Obsidian Entertainment has laid off 25% of its workforce as part of the Xbox reset. Obsidian is a subsidiary of Xbox and is beholden to the changes demanded by the parent company. The team is said to have cancelled development on Avowed 2 as well as other unannounced projects.

Schreier states that Obsidian’s Josh Sawyer will now lead the team on a new Fallout game. While the Fallout IP belongs to Bethesda, Obsidian developed 2010's Fallout: New Vegas, which became a beloved entry in the long-running franchise and is currently sitting at ‘Overwhelmingly Positive’ reviews (English reviews) on Steam. The game was also developed under the leadership of Sawyer. For the new Fallout title, Bethesda will be working with Obsidian.

As it stands now, development on Avowed 2 hasn’t stopped completely, as it was on track for an announcement next year. Some Obsidian employees will still work on the game, Schreier adds. Furthermore, the studio will also continue to support The Outer Worlds 2 and Grounded 2.