Obsidian Entertainment, the acclaimed developer behind The Outer Worlds, Avowed, and Fallout New Vegas, is facing significant workforce reductions. The studio is losing between 60 and 70 employees—roughly 25% of its staff—as part of the sweeping restructuring announced within Microsoft's Xbox division this week.
While Obsidian was not explicitly named in the initial announcement regarding the 3,200 jobs impacted across Xbox, the cuts have hit the studio hard. The layoffs span multiple departments, including writing, design, programming, art, and QA. According to reports, the departures include senior talent, such as the art director for The Outer Worlds, and notably, the studio’s only recruiter. Some of the impacted staff had been with the company for over a decade.
The Impact on Current Projects
Despite the restructuring, the studio’s immediate development pipeline appears to remain intact for the time being. Obsidian will continue work on Grounded 2 and is still scheduled to release further DLC for The Outer Worlds 2. However, leadership has held an all-hands meeting to clarify the studio's path forward, as projects beyond the current slate remain unconfirmed.
Jay Turner, a writer and narrative designer at the studio known for his work on Avowed, Dragon Age: Origins, and Mass Effect 2, addressed the situation on BlueSky, characterizing the cuts as “Microsoft sacrificial rituals.” The layoffs at Obsidian are part of a larger, phased approach by Microsoft, with half of the 3,200 total reductions occurring now and the remainder expected to follow throughout the coming year.
Arkane Lyon and the Status of Marvel's Blade
In the wake of the broader Xbox “reset,” questions have also emerged regarding the future of Arkane Lyon and its upcoming title, Marvel's Blade. The studio is currently engaged in a required consultation process with a regional Works Council, a standard procedure under French labor law. While the studio's long-term fate—whether it will be sold, closed, or remain under the Xbox umbrella—is currently unclear, Microsoft has publicly stated that it does not intend to cancel any first-party games that have already been announced.
Reports suggest that Marvel's Blade, which was revealed in 2023, has faced internal delays and has gone over-budget, pushing its potential release window from 2026 to 2027. Despite these hurdles, Bethesda Game Studios head Todd Howard recently noted that he had seen the project in action and was impressed by the work being done at the studio. For now, the game remains in development, even as the studio behind it navigates a period of significant corporate uncertainty.