Full Breakdown
Xbox Restructuring Leaves *Avowed* 2 Cancelled but Still Alive in a Small Team
7/12/2026, 12:01:45 AM
Core Event: Avowed sequel cancelled while a pocket team keeps working
On July 8, Bloomberg reported that Obsidian Entertainment’s planned sequel to the 2025 first-person fantasy RPG *Avowed* has been officially cancelled. Despite the cancellation, the studio has retained a small group of developers who continue to work on the project while awaiting reassignment to other titles, most notably a new Fallout game.
Background & Context: Xbox’s “reset” and shifting priorities
Microsoft’s Xbox division, led by CEO Asha Sharma, launched a broad restructuring dubbed the “Xbox reset.” The plan includes divesting five studios, cutting 1,600 jobs immediately and another 1,600 in the coming year, and laying off roughly a quarter of Obsidian’s staff. The strategy aims to move away from a sprawling Game Pass catalog toward a tighter focus on high-profile franchises such as Fallout.
Key Figures & Groups
- Obsidian Entertainment – developer of *Avowed*, *The Outer Worlds 2*, and *Grounded 2*.
- Jason Schrier – Bloomberg reporter who first disclosed the cancellation and the continued work on *Avowed 2*.
- Jason Schreier – Bloomberg journalist who expanded on the small team’s status in a video essay.
- Asha Sharma – Xbox chief architect of the reset.
- Josh Sawyer – veteran designer slated to lead the early-stage Fallout project.
Data & Statistics
- 1,600 Xbox employees laid off; another 1,600 slated for the next year.
- Approximately 25 % of Obsidian’s workforce reduced.
- Five Xbox studios divested as part of the reset.
Why It Matters / Impact
The cancellation curtails the development of a sequel that was already “farther along than most people would expect” for a game released only a year earlier. Fans of the fantasy world of Eora lose a near-ready continuation, while Xbox reallocates resources to a franchise with broader commercial pull. The move also signals a corporate preference for recognizable IPs over experimental titles, potentially reshaping the future of first-party releases on Game Pass.
Official Statements & Responses
Bloomberg’s coverage indicates that Obsidian’s reorganization forces the studio to pivot toward an early-stage Fallout title, with development led by Josh Sawyer. Internal reports suggest the small *Avowed 2* team hopes to bring the project close enough to completion that Xbox might deem the remaining cost acceptable. No formal Xbox or Microsoft comment has confirmed a reversal of the cancellation.
Criticism & Opposition
VICE notes that while the continued effort on *Avowed 2* offers “a glimmer of hope,” it falls short of an official commitment, urging fans not to raise expectations. The outlet also frames the reset as a shift away from supporting a diverse Game Pass library, a point echoed by industry observers who view the layoffs as a symptom of a “cruel” corporate overhaul.
Conflicting Reports & Gaps
Sources differ on the reporter’s name—Jason Schrier in one account and Jason Schreier in another—yet both convey the same core facts. No Xbox spokesperson has publicly addressed the status of the small team or the likelihood of the sequel’s revival, leaving the ultimate fate of *Avowed 2* uncertain.
Verbatim Quotes
- “By the way, quick side note is that Obsidian is – they actually have a small team that was working on Avowed 2 that is still going to keep working on Avowed 2 – even though it is cancelled – while they wait for other projects like Fallout to be ready for them.” — Jason Schrier, Bloomberg
- “Schreier ellaborated on this part of the report in a recent video essay diving further into The Cruelest Part of Xbox’s Layoffs: “Obsidian [has] a small team that was working on Avowed 2, that’s going to still work on Avowed 2 even though it is canceled.” — Jason Schreier, Bloomberg
- “Maybe in hopes of getting it uncancelled, it was actually further along than most people would guess for a sequel to a game that came out last year.” — Jason Schreier, Bloomberg
- “’ It won’t cost that much more to finish it.” — Jason Schreier, Bloomberg
What’s Next
Obsidian is entering early planning for a new Fallout title under Josh Sawyer, with no public reveal date announced. The studio will continue supporting *The Outer Worlds 2* DLC and ongoing work on *Grounded 2* while the small *Avowed 2* team remains in limbo, potentially contributing technology to the Fallout effort.
