Obsidian Working On New Fallout As Xbox Cancel’s Avowed 2

Microsoft is tightening its Xbox studio roster amid sweeping layoffs, and the remaining teams are being reoriented. Bloomberg reports that Obsidian, the studio behind Avowed and The Outer Worlds, has scrapped its planned Avowed sequel and is redirecting its efforts toward a new Fallout title—a move that both satisfies long‑time fans and diverges sharply from earlier plans.

Bloomberg sources indicate that Josh Sawyer, Obsidian’s design director, will spearhead the new Fallout venture, marking the studio’s return to the post‑apocalyptic series after the 2010 success of Fallout: New Vegas. However, the strategy remains fluid, and Sawyer had previously overseen an RPG with a Fallout‑like structure and theme, though it was not part of Bethesda’s universe.

A WARN Act filing confirms that 52 employees were laid off from Obsidian’s Irvine office, representing roughly a quarter of the studio’s workforce. The Avowed sequel, which was slated for a reveal within a year, was dropped because it did not align with Xbox CEO Asha Sharma’s strategy; Avowed and Pillars of Eternity are not core franchises, and the original title underperformed commercially.

The shift to Fallout arrives as the franchise’s television adaptation continues to thrive on Amazon Prime, even though Fallout 5 remains elusive while Bethesda focuses on The Elder Scrolls VI. Under Sharma, Xbox aims to accelerate development of its flagship franchises, including Halo, further emphasizing a focus on high‑impact IPs.

Bloomberg’s sources reveal that Bethesda will remain a key player in the upcoming Fallout venture, even as the studio continues to focus on delivering The Elder Scrolls VI—a title still several years away from launch.