Obsidian Is Making a New Fallout Game After Xbox Scraps Avowed 2, Led by Josh Sawyer

Bloomberg dropped a report today that is going to send Fallout fans into a frenzy: Obsidian Entertainment is shelving Avowed 2 and shifting its resources to a new Fallout game, with veteran designer Josh Sawyer leading the project. This comes straight out of the ongoing Xbox restructuring that already swallowed 3,200 jobs and rearranged half of Microsoft's gaming portfolio. A soul for a soul, as IGN put it. The question now is whether the trade is actually worth it.

Avowed 2 Is Gone and That Stings

Avowed launched in February 2025 to solid reviews and a devoted audience. It was not a blockbuster, but it was a confident, well-crafted first-person RPG set in the Pillars of Eternity universe, an original world that Obsidian built from scratch and spent years developing. The sequel was a natural next step. A small skeleton crew will reportedly stay on the project with the hope of reviving it later, but that phrase has a familiar ring to it. In the Xbox ecosystem right now, 'revive it later' often means 'we are done with this.' Avowed 2 is functionally cancelled. Fans of Eora have every right to be disappointed, because Microsoft is once again making the safe commercial bet over the creative risk.

Josh Sawyer and the New Vegas Weight

Here is the part that makes this news genuinely exciting despite everything. Josh Sawyer was the lead designer and project director on Fallout: New Vegas. That game, released in 2010, is still the high-water mark for what a Fallout RPG can be. Reactve factions, layered writing, a setting with actual personality, and enough build variety to sustain thousands of hours of community theorycrafting. Sawyer has spent the years since working on other Obsidian projects, including Pentiment, a completely different kind of game that showed he still had something to say when given creative freedom. Bloomberg notes he was already working on a structurally similar RPG to Fallout before this pivot happened, which suggests the transition is not a cold restart. He is already in the right headspace.

Bethesda will work with Obsidian on the project. That is a notable detail. The last time these two studios shared a Fallout game, it ended with Bethesda and Obsidian in a legal dispute over a Metacritic bonus that New Vegas missed by a single point. The relationship has presumably healed over the fifteen-plus years since, but the collaboration still carries some historical weight. Bethesda holds the IP. Obsidian brings the design sensibility that made New Vegas what it is. Whether those two things can coexist without friction is a real question.

A Franchise Sitting on Empty

Fallout 4 came out in 2015. Fallout 76 launched in 2018 as a multiplayer survival game that spent its first two years digging out of a PR crater before settling into a niche audience. The mainline, single-player Fallout experience has been dormant for over a decade. That gap has only gotten wider since Amazon's live-action Fallout series debuted on Prime Video, drew massive viewership, and reminded an entire generation why they care about this setting. The show did the marketing work for free. It put Fallout back in front of millions of people who had not thought about Vault-Tec since 2008. And Bethesda had nothing to offer them because the studio is buried in Elder Scrolls 6, a game that is reportedly still at least two more years from release.

That vacuum is what Obsidian is being handed. The timing makes commercial sense even if the creative circumstances are messy. Microsoft needs something with franchise recognition that can perform. Fallout, with the TV series keeping it visible and New Vegas nostalgia running hot, is that franchise right now. Obsidian, even after losing 25 percent of its staff in the Xbox layoff sweep, still has the Sawyer-led talent to make something worthwhile.

Community Reaction Is Torn but Leaning Hopeful

The reaction on social media split predictably down fan-loyalty lines. Fallout and New Vegas fans are treating this like a long-overdue announcement, pointing out that Sawyer is the right person for this job and that the franchise has been waiting too long for a proper single-player entry. Pillars of Eternity and Avowed fans are furious, arguing that Obsidian keeps getting pulled away from original work to service Microsoft's biggest commercial properties. Both reactions are fair. The community response is genuinely mixed, not a clean wave of excitement. A few voices flagged that expectations will be brutally high, and that any stumble on a new Obsidian Fallout will land twice as hard given the New Vegas legacy it is inheriting.

The Honest Take

Microsoft is playing its strongest remaining card. After gutting id Software, Obsidian, Bethesda, and a string of other studios, the company needs wins. Pushing Josh Sawyer and Obsidian onto a new Fallout RPG is not a creative decision, it is a strategic one. The good news is that strategic decisions and good games are not mutually exclusive. New Vegas was greenlit under similar pressure, rushed to a deadline Obsidian barely made, and still turned out to be one of the best RPGs of the past twenty years. The conditions here are not ideal. They rarely are. What matters is what Sawyer actually builds. And if Bloomberg is right that he was already working on something structurally close to Fallout before the official pivot, there may be more of a coherent vision in place than the headlines suggest.

There is no release window, no title, and no trailer yet. This is a report, not an announcement. But it is the most interesting piece of Xbox studio news to come out of this entire restructuring mess, and that is saying something given how much ground the layoffs have already covered. Keep your expectations measured. Keep your eye on Sawyer.