Microsoft’s Xbox reset is pivoting Obsidian to make Fallout instead of Avowed
Summary
Microsoft's Xbox reset leads Obsidian to cancel an Avowed sequel and begin work on a new Fallout game, with Fallout: New Vegas director Josh Sawyer heading the project, amid layoffs affecting 25% of the studio.
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<p class="wp-block-paragraph">As part of Microsoft's big Xbox "reset," which includes layoffs affecting 3,200 staffers, jettisoning studios, and shifting investments to focus on "higher priority projects," Obsidian Entertainment is changing its plans. The studio, behind games like <em>Grounded</em> and <em>The Outer Worlds</em>, is starting work on a new <em>Fallout</em> title and has canceled "multiple projects," including a sequel to last year's <em>Avowed</em>, <a href="https://www.bloomberg.com/news/articles/2026-07-08/microsoft-s-xbox-to-shift-obsidian-studio-to-new-fallout-video-game?accessToken=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJzb3VyY2UiOiJTdWJzY3JpYmVyR2lmdGVkQXJ0aWNsZSIsImlhdCI6MTc4MzUzMzE2NSwiZXhwIjoxNzg0MTM3OTY1LCJhcnRpY2xlSWQiOiJUSFZBWklWVFRDWk0wMCIsImJjb25uZWN0SWQiOiJCMUVBQkI5NjQ2QUM0REZFQTJBRkI4MjI1MzgyQTJFQSJ9.9UWhy-Whti5Meu89-fQ5LQd_ZHqAtJVbXoWOcVtFkkU">according to <em>Bloomberg</em></a>.</p>
<p class="wp-block-paragraph">Despite the success of <a href="https://www.theverge.com/entertainment/844926/fallout-season-2-review-amazon-prime-video">the <em>Fallout</em> TV show</a>, which <a href="https://www.theverge.com/news/665484/fallout-amazon-prime-video-season-2-3">is getting a third season</a>, Xbox hasn't released a new game in the series <a href="https://www.theverge.com/2018/11/20/18104623/fallout-76-journal-day-3-mothman-museum-xbox-ps4-pc">since 2018's <em>Fallout 76</em></a>. Josh Sawyer, Obsidian's studio design director, will head up the new <em>Fall …</em></p>
<p><a href="https://www.theverge.com/games/963024/microsoft-xbox-reset-obsidian-fallout-layoffs">Read the full story at The Verge.</a></p>
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# Microsoft’s Xbox reset is pivoting Obsidian to make Fallout instead of Avowed
Source: [https://www.theverge.com/games/963024/microsoft-xbox-reset-obsidian-fallout-layoffs](https://www.theverge.com/games/963024/microsoft-xbox-reset-obsidian-fallout-layoffs)
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Josh Sawyer, the director of Fallout: New Vegas, is reportedly heading up the new game\.
Josh Sawyer, the director of Fallout: New Vegas, is reportedly heading up the new game\.
by
Jul 8, 2026, 6:50 PM UTC
Image: Bethesda Softworks
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Jay Peters
is a senior reporter covering technology, gaming, and more\. He joined The Verge in 2019 after nearly two years at Techmeme\.
As part of Microsoft’s big Xbox “reset,” which includes layoffs affecting 3,200 staffers, jettisoning studios, and shifting investments to focus on “higher priority projects,” Obsidian Entertainment is changing its plans\. The studio, behind games like*Grounded*and*The Outer Worlds*, is starting work on a new*Fallout*title and has canceled “multiple projects,” including a sequel to last year’s*Avowed*,[according to*Bloomberg*](https://www.bloomberg.com/news/articles/2026-07-08/microsoft-s-xbox-to-shift-obsidian-studio-to-new-fallout-video-game?accessToken=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJzb3VyY2UiOiJTdWJzY3JpYmVyR2lmdGVkQXJ0aWNsZSIsImlhdCI6MTc4MzUzMzE2NSwiZXhwIjoxNzg0MTM3OTY1LCJhcnRpY2xlSWQiOiJUSFZBWklWVFRDWk0wMCIsImJjb25uZWN0SWQiOiJCMUVBQkI5NjQ2QUM0REZFQTJBRkI4MjI1MzgyQTJFQSJ9.9UWhy-Whti5Meu89-fQ5LQd_ZHqAtJVbXoWOcVtFkkU)\.
Despite the success of[the*Fallout*TV show](https://www.theverge.com/entertainment/844926/fallout-season-2-review-amazon-prime-video), which[is getting a third season](https://www.theverge.com/news/665484/fallout-amazon-prime-video-season-2-3), Xbox hasn’t released a new game in the series[since 2018’s*Fallout 76*](https://www.theverge.com/2018/11/20/18104623/fallout-76-journal-day-3-mothman-museum-xbox-ps4-pc)\. Josh Sawyer, Obsidian’s studio design director, will head up the new*Fallout*game\. Sawyer, who has also served as director on[2022’s*Pentiment*](https://www.theverge.com/23460260/pentiment-xbox-pc-obsidian-interview)and on*Fallout: New Vegas*, had apparently been directing an RPG that was “similar structurally and thematically to*Fallout*but was not part of the franchise,”*Bloomberg*says\.
As for the[*Avowed*](https://www.theverge.com/games-review/611255/avowed-review-xbox-pc)sequel,*Bloomberg*reports that development was “going well” and would have been announced within the next year\. Obsidian still plans to work on the early access game[*Grounded 2*](https://grounded2.obsidian.net/)and on DLC for[*The Outer Worlds 2*](https://www.theverge.com/entertainment/809022/the-outer-worlds-2-corporate-satire-interview-xbox)\.
Xbox spokesperson Delaney Simmons declined to comment\. The company laid off about 25 percent of Obsidian’s staff this week,[according to*Kotaku*](https://kotaku.com/avowed-the-outer-worlds-pentiment-studio-obsidian-xbox-layoffs-2000713032?ref=aftermath.site)\.
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