Obsidian Entertainment has reportedly canceled a planned sequel to its 2025 RPG, Avowed, to begin development on a new Fallout game. This shift is part of a broader strategic realignment within Xbox's gaming division, which has also led to significant layoffs at the studio.
According to a report from Bloomberg, approximately 25% of Obsidian's staff have been affected by the recent Xbox layoffs, a number that includes long-time art director Daniel Alpert. The report suggests that Xbox's directive to concentrate on its most prominent existing franchises has prompted Obsidian's pivot towards a new Fallout title. Studio design director Josh Sawyer is said to be leading this new project. Obsidian has prior experience with the Fallout universe, having developed the critically acclaimed Fallout: New Vegas in 2010.
Avowed 2 was reportedly progressing well and was on track for an announcement within the next year. However, the project did not align with Xbox CEO Asha Sharma's revised company strategy. While the sequel has been shelved, some employees are expected to continue working on it in some capacity as the new Fallout game takes shape, potentially leaving the door open for a future revival.
Avowed was one of three games Obsidian released in 2025, alongside Grounded 2, which launched in Early Access, and The Outer Worlds 2. Despite generally positive reviews for both Avowed and The Outer Worlds 2, neither title met sales expectations. In addition to the new Fallout endeavor, Obsidian will continue its work on Grounded 2 and develop downloadable content for The Outer Worlds 2.