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Microsoft Shifts Obsidian to Fallout as Xbox Cuts 3,200 Jobs

7/9/2026

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Summary

Obsidian Shifts Fallout

Microsoft is moving Obsidian Entertainment to develop a new Fallout game, led by Josh Sawyer, after shelving the Avowed sequel and prioritizing Fallout following its $7.5 billion ZeniMax acquisition.
Xbox will cut about 3,200 jobs while Obsidian will lose 60-70 staff, roughly one-fourth of its workforce.
Obsidian will support Grounded 2 and Outer Worlds 2 DLC as it begins work on the unannounced Fallout title.

Summary

Bethesda Supports Fallout

Bethesda will provide technical support for Obsidian’s new Fallout game while continuing updates for Fallout 76.
After cancelling the Avowed sequel for not fitting the franchise-first strategy, a portion of Obsidian staff will continue working on the unfinished project temporarily.
The Outer Worlds 2 and Avowed missed sales targets, prompting a shift toward larger franchises.
The Fallout TV series earned critical acclaim and a third season, raising hopes for a new game.

Summary

Cain Returns

Tim Cain, the original creator of Fallout, rejoined Obsidian Entertainment in a full-time role in December 2025.
Cain said he is already working on a secret project and warned guesses will be wrong.
Obsidian released three separate titles in 2025, showing an unusually high output for the studio.
Observers note that Cain may steer the forthcoming triple-A Fallout, slated for a four-to-six-year development horizon, toward classic design roots.

History

Historical Context

Microsoft announced in September 2020 it would acquire ZeniMax Media, Bethesda’s parent, and completed the $8.1 billion deal on March 9 2021, adding Fallout and The Elder Scrolls to Xbox Game Studios. This followed the 2014 Mojang purchase and preceded the 2022-23 Activision Blizzard acquisition, illustrating Satya Nadella’s and Phil Spencer’s strategy to concentrate on established, high-value gaming IPs.

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Obsidian Shifts Fallout

Microsoft is moving Obsidian Entertainment to develop a new Fallout game, led by Josh Sawyer, after shelving the Avowed sequel and prioritizing Fallout following its $7.5 billion ZeniMax acquisition.
Xbox will cut about 3,200 jobs while Obsidian will lose 60-70 staff, roughly one-fourth of its workforce.
Obsidian will support Grounded 2 and Outer Worlds 2 DLC as it begins work on the unannounced Fallout title.

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