Fallout Returns to Obsidian 16 Years After New Vegas

For years, the single most requested thing in RPG circles has been simple: let Obsidian make another Fallout. According to a report from Bloomberg's Jason Schreier, that's finally happening. But the cost of getting there should temper any celebration.

Obsidian Entertainment is pivoting to a new Fallout title led by studio design director Josh Sawyer, who directed 2010's Fallout: New Vegas. The project comes as Xbox cancels a planned Avowed sequel and lays off roughly a quarter of Obsidian's staff. A WARN Act notice filed in California, obtained by Game File, confirms 52 employees were let go from the Irvine-based studio, including 43 office-based and nine remote workers. Bloomberg's sources say the Avowed sequel was progressing well and was on track for a reveal within the next year, but it didn't fit into new Xbox CEO Asha Sharma's strategy of consolidating around tentpole franchises.

Sawyer was previously directing an unannounced RPG described as "similar structurally and thematically" to Fallout without actually being part of the Bethesda-owned universe. That project has now been folded into a proper Fallout game. Bloomberg's sources caution that the strategy is "in flux" and could still change, but the direction is clear: Xbox wants Fallout content while Bethesda remains locked into The Elder Scrolls VI, which is still years from release. Bethesda will reportedly remain involved with the new Fallout project in some capacity.

Sawyer's Return to the Wasteland

The emotional pull here is obvious. Fallout: New Vegas is one of the most beloved RPGs ever made, and Sawyer leading a return to that franchise is the kind of news that would normally have me unreservedly excited. I'm not there. Obsidian just lost a quarter of its people. Multiple unannounced projects were killed alongside Avowed 2. Some remaining developers will reportedly continue working on the cancelled sequel while waiting for Fallout to ramp up, apparently holding out hope it could be revived someday. Obsidian will also continue producing DLC for The Outer Worlds 2 and working on Grounded 2.

The context around this decision is bleak. Bethesda's head of studios, Jill Braff, told employees this week that the publisher is restructuring around its "strongest franchises," shifting away from a model where each studio planned its own future. Avowed, which launched in 2025, reportedly didn't meet sales expectations, and neither did The Outer Worlds 2. Grounded 2, according to a Bloomberg interview with Obsidian head Fergus Urquhart published earlier this year, was described as "a big hit." So the calculus from Xbox's side is straightforward: Obsidian's original IP hasn't performed, Fallout is a proven brand supercharged by the Amazon TV adaptation, and Bethesda can't make a new one for years. Give it to Obsidian.

I get the business logic. Fallout is enormous, the show keeps driving interest, and Fallout 5 is likely a decade away if Bethesda follows its usual cadence. Obsidian is the one external studio that's proven it can make a great Fallout game. But stripping a studio down to its bones, killing the projects its people were actively building, and then handing them a franchise assignment isn't a creative triumph. It's resource allocation.

Obsidian making another Fallout should feel like a victory lap. Instead it arrives wrapped in layoff notices and cancelled games. If Sawyer and whatever remains of his team deliver something special, it'll be in spite of how they got there, not because of it. No release window or platforms have been announced.