Obsidian pivots to new Fallout game as Avowed sequel gets cancelled

Microsoft is redirecting Obsidian Entertainment away from an Avowed sequel and toward a new Fallout game, according to a Bloomberg report. Josh Sawyer — who directed Fallout: New Vegas in 2010 — will reportedly lead the project, marking Obsidian's return to the post-apocalyptic franchise for the first time in 15 years.

The shift comes as part of the broader "Xbox reset" under new Xbox CEO Asha Sharma, who is pushing to accelerate development on core franchises. The Avowed sequel had reportedly been on track for a reveal within the next year, but was cut because it didn't fit Sharma's strategy — likely because the Avowed and Pillars of Eternity brand wasn't seen as a pillar franchise, and the original Avowed failed to meet sales expectations. Before the Fallout pivot, Sawyer was directing an unannounced RPG described as "similar structurally and thematically" to Fallout but outside the Bethesda universe — that project is now shelved. Bloomberg's sources stress the new Fallout strategy is still "in flux" and could change. Bethesda will remain involved in some capacity even as it continues work on The Elder Scrolls VI, which is still years out. A WARN Act filing confirms 52 people were laid off from Obsidian's Irvine, California office — roughly a quarter of the studio's total headcount.

Obsidian making a Fallout game has been a fan request since the Microsoft-Bethesda acquisition closed in 2021. New Vegas remains one of the most beloved entries in the series, and Sawyer's involvement gives the project real credibility. The timing also makes business sense: the Fallout TV show on Amazon is a genuine hit, and Fallout 5 from Bethesda is nowhere close — Bethesda is still deep in Elder Scrolls VI development.

Reaction is genuinely split. Fans who've wanted a New Vegas follow-up for years are excited, but the news is hard to celebrate cleanly given that it arrives alongside mass layoffs and cancelled projects. PC Gamer summed it up well: the prospect of Obsidian and Sawyer on Fallout is appealing, but it's difficult to feel purely positive when dozens of people just lost their jobs to make it happen.