Obsidian Entertainment Cancels 'Avowed' Sequel to Build New 'Fallout' Game

Microsoft is initiating a massive restructuring of its gaming division, resulting in deep cuts at Obsidian Entertainment. The acclaimed studio is reportedly losing approximately 25 percent of its workforce. According to reports, the reduction impacts roughly 60 to 70 employees across all disciplines. The layoffs swept through the company ranks, affecting producers, writers, programmers and veteran staff members with over a decade of tenure.

Amid the widespread downsizing, Microsoft is shifting the developer focus toward higher-priority intellectual property. Obsidian is reportedly developing a new entry in the beloved Fallout franchise. To accommodate the pivot, executives canceled a planned sequel to the recently released fantasy game Avowed. The strategic realignment arrives as part of a sweeping corporate mandate that eliminated 3,200 positions across the broader Xbox organization.

Despite the severe personnel reductions, the developer retains several active projects. Work will continue on Grounded 2, a cooperative survival sequel currently in early access across PC and consoles with a planned release for the PlayStation 5. The title introduces new mechanics where shrunken players can hatch, raise and ride insect companions to navigate an overgrown backyard environment. Alongside the survival adventure, the studio is also proceeding with announced downloadable content for The Outer Worlds 2. However, remaining employees are reportedly waiting on formal guidance regarding how the current production pipeline will function with a significantly diminished headcount.

The recent restructuring signals a shifting era for the storied company. Acquired by Microsoft in 2018, the team consistently delivered critically acclaimed narratives like the Peabody Award-winning Pentiment. Now, the organization faces the challenge of maintaining its prolific output while navigating one of the most substantial corporate contractions in recent gaming history.