Obsidian is cancelling the Avowed sequel to make a new Fallout game led by the New Vegas director

[Its_Jackson62]

A pretty dramatic pivot buried inside Xbox's ongoing restructuring

According to Bloomberg's Jason Schreier, Xbox owned developer Obsidian Entertainment has cancelled its planned sequel to 2025's Avowed, along with a separate unannounced RPG, and is instead pivoting the studio onto a brand new game set in the Fallout universe. The new project will reportedly be led by studio design director Josh Sawyer, the same person who directed Fallout: New Vegas, still widely considered the best entry in the franchise and the only mainline Fallout game not made internally by Bethesda Game Studios

The timing lines up with a rough stretch for the studio more broadly, a California WARN Act notice confirmed 52 employees were laid off from Obsidian's Irvine office, roughly a quarter of its total headcount, as part of the wider wave of Xbox job cuts announced recently

Why cancel something that was reportedly going well

What makes this notable rather than just a routine cancellation is that the Avowed sequel was, according to the report, progressing well internally and on track to be publicly revealed sometime in 2027, not a troubled project quietly put out of its misery. It was cut specifically because it did not fit into new Xbox CEO Asha Sharma's strategy of concentrating resources on the company's biggest existing franchises, and Avowed, while reviewed positively, reportedly underperformed commercially enough that a sequel no longer made the cut under that new lens

Josh Sawyer himself had actually been directing a different RPG at Obsidian, one described as structurally and thematically similar to Fallout but not officially part of the franchise, which makes the pivot read less like a cold start and more like redirecting work that was already conceptually adjacent

Why Fallout, and why now

Bethesda Game Studios remains deep in development on The Elder Scrolls VI, meaning there has been no active mainline Fallout project in the pipeline for years, and the franchise has never been more culturally visible thanks to two hit seasons of Amazon's live action Fallout series pulling in audiences well beyond the traditional gaming fanbase. Handing the property to the studio that already delivered the fan favorite New Vegas fills that development gap while keeping Bethesda's own team focused, and Bloomberg's sources indicate Bethesda will still be involved with the new project in some capacity even while its main focus stays on Elder Scrolls

Nothing about this has been officially confirmed by Xbox, Obsidian, or Bethesda, and Bloomberg's own sourcing describes the strategy as still in flux and potentially subject to change, with some staff reportedly still quietly working on the shelved Avowed sequel in case there is ever an opportunity to revive it

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[Gunther29]

Cancelling a sequel that was reportedly going well internally to chase a bigger franchise is such a cold but honestly pretty understandable business decision from Xbox's side given how underwhelming Avowed's sales actually were

[Always_David72]

Josh Sawyer directing New Vegas gives this instant credibility that a random announcement never would, that game's reputation has only grown over the years since it released

[Bob81]

The detail about Sawyer already working on a Fallout adjacent RPG before this pivot makes the whole move feel a lot less abrupt than the headline makes it sound

[Abbie21]

Losing 25 percent of the studio's staff right as they're handed one of gaming's biggest franchises is a rough way to start a genuinely exciting new project

[CMPunk88]

Bethesda having zero mainline Fallout game in active development for this long always felt like a strange gap given how huge the TV show has been, glad someone's finally filling it