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Obsidian Fallout Game Reportedly Replaces Planned Avowed Sequel
Obsidian Entertainment has reportedly become one of the latest studios reshaped by Xbox’s wider restructuring, with new reports claiming the RPG developer is being redirected toward a new Fallout project.
According to Bloomberg, Obsidian has laid off around a quarter of its staff and cancelled multiple projects as part of Microsoft’s latest gaming reset. The most notable casualty is reportedly a planned sequel to Avowed, which had progressed far enough that a public announcement was once scheduled for 2027.
Avowed was designed as the studio’s major first-person fantasy RPG set in the world of Eora, and a sequel would have allowed the studio to build on existing technology, combat systems, art direction, and worldbuilding. Instead, Xbox now appears to be prioritising a more recognisable franchise with broader commercial pull.
Avowed 2 Has Reportedly Been Shelved
The reported cancellation does not seem to be a simple reflection of development trouble. Reports suggest the planned Avowed sequel was considered relatively efficient because it could reuse major parts of the original game’s foundation. However, the first Avowed reportedly fell short of Microsoft’s financial expectations, making the sequel harder to justify under Xbox’s new strategy.
That strategy appears to be focused on faster results, bigger brands, and clearer returns from first-party investment. In that environment, a second Avowed may have looked less attractive than a new Fallout project, even if the groundwork was already in place. For fans of Eora, it is a frustrating turn of events. Avowed had room to grow, and fantasy worlds often benefit from iteration, but for now, that future appears to be on hold.
Josh Sawyer Is Reportedly Leading the Project
The more exciting part of the report is the possibility that the studio will return to the wasteland. The new project is reportedly being led by Josh Sawyer, whose past work includes New Vegas and Pentiment. That name alone will immediately raise expectations, especially among players who have spent years asking for another chance in Bethesda’s post-apocalyptic RPG universe.
A new Fallout game would also make strategic sense for Microsoft. Bethesda Game Studios is still focused on The Elder Scrolls VI, while a full Fallout 5 remains far away. With the TV series keeping the franchise highly visible, Xbox may see Obsidian as the clearest way to fill that gap. Still, the project is reportedly in early planning, which means fans should not expect a reveal soon.
A Small Avowed Team May Still Remain
Interestingly, the report suggests Avowed has not been completely abandoned internally. A small team is reportedly still working on elements tied to the cancelled sequel. Part of that work may help establish technology and systems for the new Fallout project, while also keeping the possibility of an Avowed revival alive if Xbox’s priorities change again.
That leaves Eora in a strange position. The franchise may not be dead, but it is no longer the immediate priority. Meanwhile, Obsidian is expected to continue supporting The Outer Worlds 2 with downloadable content, while work on Grounded 2 continues.
Xbox’s New Strategy Is Becoming Clearer
The development fits into a broader pattern across Xbox’s restructuring. Microsoft appears to be reducing risk, cutting projects that do not align with its new priorities, and shifting resources toward franchises with stronger recognition. From a business perspective, that makes Fallout an obvious target. From a creative perspective, it is more complicated.
Obsidian has always been at its best when it has room to make strange, reactive, character-driven RPGs. A new Fallout from the studio could be exactly what fans want, especially with Sawyer involved. However, the cost of getting there appears to be layoffs, cancelled projects, and a narrower roadmap.
For now, the studio’s future looks increasingly tied to the wasteland again. Whether that is a creative opportunity or another symptom of Xbox’s difficult reset will depend on what the studio is actually allowed to build.
