Obsidian Entertainment is shifting its development focus to the Fallout franchise as the studio navigates the aftermath of significant layoffs. Following Microsoft's recent 3,200 job cuts across its Xbox division, Obsidian has reportedly lost approximately 25 percent of its workforce. In response to these changes, the studio is moving to align with Microsoft's broader strategy of prioritizing its largest franchises, which now includes a new, original Fallout project.

Quick Facts

  • Obsidian Entertainment has lost 25% of its staff in the 2026 Xbox layoffs.
  • The studio is now developing a new Fallout game, not a remaster.
  • Multiple projects have been cancelled, including a sequel to 2025's Avowed.
  • Director Brandon Adler confirmed that lead and director roles are still largely held by veterans who worked on New Vegas, The Outer Worlds, and Pillars of Eternity.

Defending the Studio's DNA

The transition follows a period of public scrutiny regarding the studio’s identity. Brandon Adler, a director at Obsidian who has been with the studio for 13 years, recently took to LinkedIn to address criticism that the developer is no longer the same team that created cult classics like Fallout: New Vegas. Adler pushed back against what he termed "cold take artists" who claim the studio has lost its essence.

"The number of times I've seen people, with no understanding of who has worked on our previous games or what they contributed, talk about how Obsidian isn't who they used to be... is staggering," Adler wrote.

Adler emphasized that the core personnel remain consistent, noting that the people currently in lead or director roles are the same individuals who contributed to The Outer Worlds, Pillars of Eternity, and New Vegas. "The DNA at Obsidian is the same as it always was," he stated, citing a clear through line from Knights of the Old Republic II to the studio's current output.

Project Cancellations and Future Focus

The realignment toward the Fallout franchise comes at a high cost for the studio's internal roadmap. According to reports, the shift in focus and the loss of a quarter of the staff have necessitated the cancellation of several projects, most notably a sequel to the 2025 role-playing game Avowed. The move reflects Microsoft’s stated intent to concentrate resources on its biggest intellectual properties, such as Fallout, The Elder Scrolls, and Quake.

While the studio faces a difficult period, industry peers have voiced support for the team, with one peer noting on LinkedIn that "anyone who has gotten to work with Obsidian knows how truly special the studio is." Adler concluded his comments by expressing pride in the studio's history and an openness to its future evolution, despite the recent challenges.