Obsidian shifts to a new Fallout as Xbox cancels an Avowed sequel, report says

Obsidian Entertainment is being moved onto a new Fallout game as part of Microsoft’s Xbox restructuring. The July 8 r/Games post points to Bloomberg reporting, later summarized by The Verge, that Josh Sawyer will lead the project. Sawyer directed Fallout: New Vegas and Pentiment, so the assignment puts one of Obsidian’s most visible RPG leads back near the franchise most closely associated with the studio’s reputation.

The same reporting says Xbox canceled multiple Obsidian projects, including a sequel to Avowed. That cancellation is notable because the sequel was reportedly progressing well and could have been announced within the next year. The decision lands during a broader Xbox reset that includes 3,200 layoffs, divestments, and a push to move investment toward fewer, higher-priority projects.

For players, the concrete tradeoff is clear: a new Fallout is now on Obsidian’s slate, but Avowed’s follow-up has been cut before announcement. Obsidian is still expected to support Grounded 2 in early access and continue DLC work for The Outer Worlds 2. The studio is not described as closing, but its roadmap is being narrowed around Microsoft’s larger franchise priorities.

The timing matters because Fallout has not had a new main release since Fallout 76 in 2018, while Amazon’s Fallout television adaptation has kept the property in front of a broad audience. Xbox appears to be converting that franchise value into a development mandate. Microsoft declined to comment to The Verge, and the underlying reporting remains attributed to Bloomberg.