Obsidian Entertainment Reportedly Also at Risk of Closure

Avowed and The Outer Worlds developer Obsidian is reportedly also at risk of closure amid Microsoft’s “reset” of the Xbox business.

The Game Business listed the Microsoft-owned studio, which developed the much-loved Fallout: New Vegas, alongside Undead Labs, Double Fine, Ninja Theory, and Undead Labs as negotiating with Xbox leadership to avoid closure.

Obsidian is without a new announced project after both Avowed and The Outer Worlds 2 failed to hit commercial targets. There were rumors that the developer was making another Avowed game, but The Outer Worlds 3 was said to be not in development. On a more positive note, Grounded 2 — yet another 2025 launch — was a hit. But of the three games Obsidian released last year, it had the shortest (and almost certainly the cheapest) development period by far.

New Xbox boss Asha Sharma is reportedly speeding up development on new The Elder Scrolls, Fallout, and Halo games as she prepares to hit the “reset” button on Microsoft’s gaming business. Some had thought that Obsidian might have been drafted in to make a new Fallout game as part of that process, either a Fallout: New Vegas 2 or something else in the franchise.

“I know everyone on the internet, on every game we ever announce, will constantly reference back to, ‘When’s the next New Vegas?'” Obsidian’s VP of operations Marcus Morgan said last year, referencing the studio’s beloved Fallout game that’s served as the inspiration for the hit Amazon TV series’ second season setting.

Sharma sent shockwaves through the video game industry with her now infamous “reset” memo, in which she revealed that Microsoft’s gaming business has a 3% accountability margin (assumed to mean profit margin). “Excluding Activision Blizzard King, over the past five years, we have spent over $20 billion on ongoing investments in our content, platform, and hardware subsidy, but our annual revenue has declined nearly half a billion during that time. Going forward, this cannot continue,” Sharma said.

Bloomberg’s Jason Schreier has warned of a “bloodbath” at Xbox, with five studios said to be under threat of closure. Meanwhile, Microsoft is reassessing its investment in externally developed games. It just pulled funding for IO Interactive’s upcoming fantasy project, which Xbox was set to publish. Hideo Kojima’s Xbox horror game OD, however, is safe from the chopping block.

Microsoft told Bloomberg it is “taking a fresh look at where we invest so we’re focusing on our highest priorities.”

“We’re not reducing our overall investment in games. We expect to invest about the same in content as we did last year. What’s changing is where we’re investing and the kinds of projects we’re backing,” Microsoft said.

Wesley is Director, News at IGN. Find him on Twitter at @wyp100. You can reach Wesley at [email protected] or confidentially at [email protected].