Bethesda Says Obsidian Keeps Its Creative Identity After the Xbox Reshuffle, but Fallout Now Sets the Agenda

By CriticalPixel · 2026-09-24

Bethesda has a message for anyone who feared Obsidian was just swallowed by the Fallout machine: it is only a change in reporting lines. Bethesda president Jill Braff told employees that the creative identity that makes Obsidian distinct will stay at the core of the studio, and that CEO Feargus Urquhart and his leadership team keep running the place. The email surfaced on September 23, according to Aftermath, a day after Xbox folded Obsidian into Bethesda as part of a reorganization that also eliminated 268 roles. It is a soothing message from a company that has spent the year cutting studios loose, cancelling projects and shuffling franchises between divisions. So it is worth reading closely, because what the email promises and what it carefully avoids promising are two very different lists.

Official Steam screenshot from Avowed, the fantasy RPG made by Obsidian Entertainment

What Braff actually told Obsidian staff

The key line, as quoted by Aftermath, calls the move primarily a change in reporting structure. Braff wrote that Urquhart and the Obsidian leadership team will continue to lead Obsidian, with the studio reporting to her, while Bethesda Game Studios continues to lead the Fallout franchise. She also confirmed early work on a new Fallout project built together by the two teams, with more to share in the months ahead, and described the setup as a franchise-led model that keeps accountability clear for both studio and franchise. Her closing note says she has known Urquhart and his team for six years and looks forward to working more closely with them. Read it again and the split is obvious: Obsidian keeps its management, but Bethesda keeps the keys to the franchise Obsidian is now building for. Nobody promised Obsidian gets to make whatever it wants next.

The email is also narrow in scope, and Xbox's own memo is more specific than Braff's. In the Xbox Wire message from Matt Booty, Bethesda expands its remit to include Obsidian, which will continue its current projects, including Grounded, as well as the new Fallout project made in collaboration with Bethesda Game Studios. Grounded and a Fallout game. That is the whole named list. There is no mention of Avowed, The Outer Worlds or Pillars of Eternity, the original worlds that built Obsidian's reputation over the last decade, and no promise that any of them return.

The reshuffle around it

The Obsidian move was one piece of a much bigger reset. Booty's memo says Activision expands to cover World's Edge and Rare and will develop the next Halo title with a new team separate from Call of Duty, King absorbs Microsoft Casual Games, and Playground and Turn 10 merge into one studio for Forza and Fable. Undead Labs has left Microsoft's management with a new publisher for State of Decay 3, following Compulsion and Double Fine in August, while two separate deals for Ninja Theory fell through and the studio now faces a proposed closure. Arkane is still in consultation through the end of the year. Booty says the cuts and divestitures bring Xbox roughly three quarters of the way through the restructuring announced earlier this year, which is not a sentence that should comfort anyone still working there.

Windows Central lays out the timeline: Xbox has owned Obsidian since 2018, and the Bethesda acquisition closed in 2021 for $7.5 billion, so its writer says they are shocked it took this long to put the two under one roof. The outlet also ties the franchise-first logic to new Xbox CEO Asha Sharma and her push toward heavy-hitting IP. I get the org chart argument. A Fallout project with two studios on it needs one chain of command, and Todd Howard has already said there is no bad blood between the teams. What I do not buy is that a studio keeps a distinct creative identity when its next big job is helping build somebody else's franchise.

Official Steam screenshot from Avowed showing exploration in the Living Lands

Why fans are nervous

The anxiety comes from what happened before the email. Aftermath notes that layoffs in July removed around a quarter of Obsidian, citing Game Developer, and that Bloomberg reported Microsoft's restructuring forced the studio to cancel multiple projects, including a sequel to Avowed, so it could work on a new game set in the Fallout universe. Read in that light, the reporting line change looks less like housekeeping and more like the last step of a plan: shrink the studio, aim it at Fallout, then put it under the people who own Fallout. Avowed fans have good reason to feel burned, since a follow-up to a game Obsidian shipped for Xbox reportedly got shelved. Braff's line that this is primarily a reporting change lands awkwardly against that record.

Good relations between the two teams are not the issue. The issue is who wins the argument when Bethesda wants Fallout to go one way and Obsidian wants it to go another. Under the new structure the answer is written into the org chart, with Obsidian reporting to Braff and Bethesda Game Studios leading the franchise. Aftermath adds that management at other Microsoft studios, id Software among them, has sworn everything is business as usual after brutal layoffs, while employees have repeatedly voiced skepticism. Assurances of autonomy have not aged well inside this company, and a fan base watching Xbox close and sell studios has every right to remember that.

What the community is saying

Reaction so far is limited, and mostly wary. Windows Central ran a reader poll asking whether people trust Bethesda to protect Obsidian's creative identity, but the results were not visible when I checked, so there is no number to quote. Under Windows Central's post on X, the only reply I read argued that the games have sucked and need to change at the core, which is one voice and not a consensus. What can be said is that the coverage frames this as a wait-and-see moment, and Windows Central's own writer calls the clarification a relief while admitting fans will prefer results over words. Treat any claim of a settled fan verdict this week with suspicion.

Official Steam screenshot from Avowed showing combat from Obsidian Entertainment

The CriticalPixel take

Here is where I land. The email is honest about the structure and quiet about the ambition. Obsidian keeps its boss, its name and Grounded, and in exchange it spends its near future on a Fallout project with Bethesda Game Studios holding the franchise reins. That may turn out great: Obsidian made Fallout: New Vegas, still one of the most loved games in the series, and a studio with that pedigree working on Fallout again is a reasonable bet. But creative identity is a phrase companies use when they want people to stop asking who signs off on the greenlight. In everything I read this week, nobody at Microsoft has promised a new Avowed, a new Outer Worlds or a new original world from Obsidian.

Watch what Obsidian ships after the Fallout project, not what executives wrote in an email this week. Xbox has an all-hands town hall on October 6 to look ahead, and Bethesda says more on the new Fallout game is coming in the months ahead. If the next Obsidian original never shows up, that will tell everyone what creative identity really meant here. Until then, give the team the benefit of the doubt and keep the receipts.