Microsoft's sweeping Xbox restructuring has led Obsidian Entertainment to abandon multiple projects and begin work on a new Fallout game, according to Bloomberg. The shift comes as part of a broader "reset" that includes laying off approximately 3,200 employees and closing several studios.
The move redirects Obsidian's focus toward a franchise that has not seen a new mainline entry since 2018's Fallout 76, despite the recent success of a Fallout TV series now renewed for a third season. The studio's design director, Josh Sawyer, is reportedly leading the new Fallout project.
Obsidian had been working on a sequel to last year's fantasy RPG Avowed, but that project has been canceled along with other unannounced titles. Microsoft's strategy aims to concentrate investment on what it deems "higher priority projects" amid a broader effort to streamline its gaming division.
The decision leverages Obsidian's deep ties to the Fallout franchise — many of the studio's founders originally created the series at Interplay before founding Obsidian. The move signals a bet on established intellectual property over newer, untested concepts.
Critics, however, argue that the aggressive pivot and layoffs undermine long-term creative development at Xbox studios. The focus on proven franchises may come at the cost of innovative original titles that could define the platform's future.