Xbox has commissioned Obsidian Entertainment to develop a new Fallout game, led by Fallout: New Vegas project director Josh Sawyer. The move comes after Microsoft acquired the Fallout IP in 2021 and follows a recent restructuring that saw Obsidian lose roughly a quarter of its staff.
The return of the makers of New Vegas to the Fallout franchise represents a strategic shift for Xbox, prioritizing core intellectual properties over smaller, experimental titles. While fans often cite the 2010 Fallout: New Vegas as the series’ best entry, the decision to return to the franchise arrives amid significant internal turmoil at Obsidian.
Staff Reductions and Project Cancellations at Obsidian
The announcement is undercut by a wave of layoffs. Xbox recently cut a quarter of Obsidian’s workforce, an estimate totaling 60 to 70 employees. This is part of a larger trend of cuts across the organization, with total layoffs reported at roughly 3,200 people.
This shift in focus has led to the apparent cancellation of several projects. Obsidian was reportedly working on at least four titles, including a sequel to Avowed. According to a Bloomberg report, most or all of these projects were scrapped to make room for the new Fallout game. Some employees are reportedly continuing work on Avowed 2 despite the cancellation, hoping the project can be revived later because it is far enough along to have been announced this year and could be made in a shorter timeframe.
Josh Sawyer and the Bethesda Friction
Development of the new project is being led by Josh Sawyer, who served as the lead designer and project director for Fallout: New Vegas. The project may be a realization of a long-simmering idea; Bloomberg reports that Sawyer was previously directing a role-playing game similar to Fallout that was not explicitly part of the franchise.
Former Obsidian designer Chris Avellone suggested on X that Sawyer’s previous project was intended to be a Fallout title, but Bethesda put the kibosh on that
. Avellone’s comments reflect a sentiment among fans since 2010 that Bethesda is jealous that the Fallout game credited as the best in the series came from a different studio. With Microsoft now overriding Bethesda as the parent company, the new project is likely to align with Sawyer’s original intentions.
Competing Timelines: Fallout vs. The Elder Scrolls 6
The timing of this development suggests a gap in Bethesda’s own pipeline. Bethesda is currently prioritizing The Elder Scrolls 6, which is not expected to release until 2028 at the earliest. This creates a window for Obsidian’s Fallout project to reach the market before Fallout 5.
However, the game’s release is still years away if it is a proper role-playing game rather than a smaller spin-off. This timeline is further complicated by Obsidian’s remaining obligations, which include the full launch of Grounded 2 and two DLC expansions for The Outer Worlds 2, though the latter may now be cancelled. This discrepancy in timing was highlighted by conflicting reports: VGC’s Jordan Middler claimed Obsidian was already in the early stages of a Fallout project last week, while Bloomberg’s Jason Schreier stated this was not true.
Xbox’s Franchise-First Strategy
The decision to move Obsidian onto Fallout aligns with Xbox boss Asha Sharma’s strategy to prioritize the company’s core franchises. This comes after a period where Obsidian released three games last year, only one of which—Grounded 2’s early access launch—was deemed a success by Microsoft; none of them were big sellers.
This “heavy hitter” approach signals a move away from smaller, critically acclaimed titles like Pentiment, which was one of the most critically acclaimed Xbox exclusives of this generation. By banking on the continued popularity of Amazon’s Fallout TV show, which is in the process of making a third season, Xbox is leveraging a proven brand to ensure commercial viability over the studio’s more niche creative pursuits.
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