Obsidian Shifts Focus to New Fallout Game as Xbox Cancels Avowed Sequel

Microsoft’s sweeping Xbox restructuring is reportedly reshaping the future of Obsidian Entertainment, with the acclaimed role-playing game studio shifting its focus to a new Fallout title while canceling several projects, including a planned sequel to last year’s Avowed.

According to a report by Bloomberg, the move comes as part of Microsoft’s broader Xbox strategy overhaul, which includes approximately 3,200 layoffs, studio restructuring, and a renewed focus on projects considered higher priorities.

The reported changes mark a significant shift for Obsidian, one of Xbox’s most respected RPG developers. The studio is known for critically acclaimed titles including Fallout: New Vegas, The Outer Worlds, Grounded, Pentiment, and Avowed.

New Fallout project reportedly underway

Bloomberg reports that veteran game director Josh Sawyer will lead development of the new Fallout game.

Sawyer is widely regarded as one of the most influential RPG developers in the industry. He served as the director of Fallout: New Vegas, a title that remains one of the most beloved entries in Bethesda’s post-apocalyptic franchise. More recently, he directed Pentiment, Obsidian’s award-winning historical narrative RPG released in 2022.

Before the reported shift, Sawyer had reportedly been leading development on an original role-playing game described as structurally and thematically similar to Fallout but not officially part of the franchise. That project has now reportedly been shelved as development resources are redirected toward the Fallout series.

Avowed sequel reportedly canceled

One of the biggest casualties of Microsoft’s restructuring appears to be a sequel to Avowed, which launched last year.

Although the fantasy RPG received generally positive reviews and expanded Obsidian’s Pillars of Eternity universe, Bloomberg reports that plans for a follow-up have been canceled along with multiple other unannounced projects.

Microsoft has not publicly confirmed the cancellations or announced a new Fallout title.

Fallout returns to the spotlight

The reported decision comes as interest in the Fallout franchise continues to grow.

Amazon’s Fallout television adaptation has become one of the company’s most successful streaming series and has already been renewed for a third season, significantly expanding the franchise’s global audience.

Despite that momentum, gamers have not received a brand-new Fallout release since Fallout 76, which launched in 2018. While Bethesda continues to support Fallout 76 with updates, fans have long awaited the next major single-player installment.

Obsidian’s involvement has generated excitement because of the lasting popularity of Fallout: New Vegas, which many players consider one of the strongest entries in the franchise thanks to its storytelling, player choice, and role-playing depth.

Microsoft’s changing Xbox strategy

The reported project changes are part of Microsoft’s wider effort to streamline Xbox operations following major acquisitions over recent years.

The restructuring has included significant layoffs across the gaming division, project cancellations, and changes to studio priorities as Xbox seeks to concentrate investment on franchises with long-term commercial potential.

While Microsoft has described the restructuring as a move toward focusing on “higher priority projects,” the changes have affected multiple teams across its gaming business.

For Obsidian, the reported pivot represents a return to one of the franchises most closely associated with the studio’s history.

Although no release window or official announcement has been made, the prospect of Josh Sawyer leading another Fallout game is already generating considerable anticipation among RPG fans. If confirmed, it would mark Obsidian’s first return to the Fallout universe since the release of Fallout: New Vegas in 2010.

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