Microsoft’s Xbox reset is pivoting Obsidian to make Fallout instead of Avowed
Josh Sawyer, the director of Fallout: New Vegas, is reportedly heading up the new game.
by Jay Peters
Jul 8, 2026, 2:50 PM EDT
Image: Bethesda Softworks
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.
Despite the success of the Fallout TV show, which is getting a third season, Xbox hasn’t released a new game in the series since 2018’s Fallout 76. 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 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 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 and on DLC for The Outer Worlds 2.
Xbox spokesperson Delaney Simmons declined to comment. The company laid off about 25 percent of Obsidian’s staff this week, according to Kotaku.
