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Xbox Gets Obsidian Entertainment To Work On New Fallout Title, Cancels Avowed Sequel

Out with the new and in with the established.

by Ian Chee
July 9, 2026
Image: Bethesda

Image: Bethesda

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As part of the Xbox reset, which involves letting 1,600 workers go, and another 1,600 over the coming 12 months, a lot has been trimmed from the Microsoft gaming division, to say the least. This involves divesting some studios, and cutting staff in others. Among the latter is Obsidian Entertainment, which lost a quarter of its workforce, and is told to drop a sequel to Avowed. But in its place is another Fallout game.

Bloomberg cites anonymous insiders who say that the “planned sequel” to Avowed was among “other unannounced projects” that got the axe. But with the aforementioned sequel specifically, progress was noted to be going well, and on track to be announced within the next year. Ultimately, it got canned because it did not fit into the overall strategy that Asha Sharma, the current Xbox lead, had. That being said, the sources claim that some Obsidian employees will continue working on it as they wait for new projects like the new Fallout title to be ready, in hopes of reviving it one day.

New Xbox Logo
Image: Xbox

Per the report, studio design director Josh Sawyer will lead the making of the new Fallout title. But on the flip side, the “emerging strategy” is noted to still be in flux, meaning plans could still change. If it doesn’t, then things would have come full circle, with Obsidian working on a new Fallout game after New Vegas, with Sawyer at the helm again.

Meanwhile, id Software, the Doom studio, had to let go of as many as half of its staff roster as part of the Xbox reset. The figure was confirmed by one Michael Maynard, a 20-year veteran, who was one of the staffers that got let go. Similarly, Derek Best, former Principal VFX Artist at the studio, said that “the VFX team was eliminated down to one single artist with no lead or producer.

Related Article Microsoft Announces Xbox Backward Compatibility On PC

(Source: Bloomberg, Michael Maynard, Derek Best)

Filed Under id SoftwareObsidian Entertainmentxbox
Updated 4:24 pm, Thu, 9 July 26
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