Obsidian Shelves Its RPG Future as Microsoft Bets Big on Fallout
Key takeaways
- Obsidian's Avowed 2 has been shelved despite reportedly strong development progress, per Bloomberg's Jason Schreier.
- New Xbox leadership under Asha Sharma is redirecting Obsidian to develop a brand-new Fallout game.
- A small team will continue minimal work on Avowed 2 as a contingency until the Fallout project matures.
According to a report from Bloomberg journalist Jason Schreier, Xbox studio Obsidian Entertainment has been steered away from developing a sequel to its recent RPG Avowed and is now focused on a new entry in the Fallout franchise. The move represents a significant strategic shift for one of Xbox's most storied first-party studios, and it comes despite internal momentum suggesting Avowed 2 was on a healthy development trajectory. Schreier's reporting indicates the sequel had been progressing well enough that an announcement could have been expected within roughly the next twelve months.
The decision to cancel — or at least indefinitely postpone — Avowed 2 reportedly stems from the priorities set by new Xbox boss Asha Sharma. Sharma's leadership philosophy appears to be recalibrating which franchises Xbox invests in most heavily, and Fallout, with its massive name recognition and renewed mainstream popularity following the hit Amazon Prime Video series, clearly ranks higher on that list. Multiple projects at Obsidian are said to have been dropped or deprioritized as part of this wider internal restructuring.
Obsidian has a storied history with the Fallout franchise, having developed Fallout: New Vegas back in 2010 — widely considered one of the best entries in the series. Handing the studio a new Fallout project is therefore a logical fit from a legacy perspective, even if it comes at the cost of original IP development. Fans of New Vegas have long hoped Obsidian would return to the wasteland, and this report suggests that dream may finally be materializing.
Despite the cancellation of active development, a small team at Obsidian is said to be keeping Avowed 2 on life support until the new Fallout game reaches a more advanced stage of production. This suggests Xbox is leaving the door slightly ajar, potentially allowing a revival if circumstances change. It also reflects a cautious approach to talent retention — keeping key developers engaged with familiar IP rather than losing them entirely during a transition period.
The news arrives at a turbulent time for the broader games industry, with Xbox in particular facing scrutiny over studio closures and project cancellations in recent years. How Obsidian's workforce responds to this realignment, and how long the Fallout project will take to materialize into something tangible, remains to be seen. Fans and industry observers will be watching closely for any official confirmation from Microsoft.
The bigger picture
The redirection of Obsidian toward Fallout is a revealing window into how new Xbox leadership is thinking about its first-party portfolio. Rather than nurturing emerging original IPs like Avowed — which received a moderately positive reception but perhaps not the blockbuster numbers Xbox needed — Sharma appears to be doubling down on established brand power. Fallout is simply a safer bet in an era where Microsoft needs its Game Pass catalog to justify subscriber retention, and the Amazon series has gifted the franchise an entirely new audience ready to be converted into players.
This decision also raises uncomfortable questions about the long-term health of original IP development under Xbox. Obsidian had been one of the more creatively adventurous studios under the Microsoft umbrella, with titles like Pentiment and Grounded demonstrating a willingness to take risks. Pivoting that studio almost entirely toward a franchise sequel — even a beloved one — risks narrowing the creative pipeline that made Xbox Game Studios feel diverse and ambitious just a few years ago. The industry will be watching whether this signals a permanent philosophy change or a temporary course correction.
For players, the most pressing question is timeline. Fallout games have historically taken years to develop, and with Obsidian presumably still in early stages, a release before 2028 or even 2029 seems optimistic. Bethesda's own Fallout 5 is still a distant prospect given the studio's commitment to Elder Scrolls VI. Xbox may be betting that an Obsidian-led Fallout can fill that gap — but the wait will test fan patience considerably.
We're covering this story because it touches on something we care deeply about at LagPing: the health and direction of game development studios that have historically punched above their weight. Obsidian is one of the most respected RPG developers in the industry, and decisions about what they make next genuinely matter to a huge portion of our readership. The timing here is also significant — Xbox has faced mounting criticism over studio closures and creative stagnation, and this report feeds directly into that ongoing conversation. We think it's important to frame this not just as a business reshuffling, but as a signal about what kind of games Xbox believes will win the next few years. Whether the Fallout gamble pays off, or whether shelving Avowed 2 turns out to be a costly mistake, is a story we'll be following closely. Stay with us.
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