Obsidian Entertainment, the developer behind 'Avowed' and 'The Outer Worlds', is reportedly canceling its planned sequel to 'Avowed' to pivot toward the development of a new 'Fallout' game. This was reported by Bloomberg on the 8th (local time), citing anonymous sources.

According to Bloomberg, the new 'Fallout' project will be led by studio design director Josh Sawyer. He was previously directing a separate RPG that was reportedly "structurally and thematically similar" to Fallout but unrelated to the Bethesda universe. However, sources added that this strategy remains "fluid" and subject to change.

Obsidian's history with the Fallout franchise dates back to 2010 with the development of 'Fallout: New Vegas'. Despite a short 18-month development cycle and controversy over bugs at launch, the game has been increasingly re-evaluated over time for its design, which offers players a wide range of narrative choices.

To this day, 'Fallout: New Vegas' is considered one of the series' greatest masterpieces and a cult classic. Ever since Microsoft acquired both Obsidian in 2018 and Bethesda in 2021, fans have consistently demanded that Obsidian return to the franchise. Given that Josh Sawyer was the director of 'New Vegas', this news is effectively being received as the development of a spiritual successor 16 years in the making.

However, the reception is not entirely positive. The announcement came at the cost of staff layoffs at Obsidian and the cancellation of the 'Avowed' sequel. Fans have reacted with frustration, asking, "Why grant a request we've been making for years only after dismantling parts of the studio?" while also raising concerns that this may be a sign of Obsidian losing its creative autonomy.

According to a notice filed under the U.S. WARN Act (Worker Adjustment and Retraining Notification Act), 52 employees were laid off at Obsidian's studio in Irvine, California. This represents approximately one-quarter of the studio's total workforce.

The canceled 'Avowed' sequel was reportedly slated for reveal within a year, but the project was scrapped because it "did not align" with the strategy of new Xbox CEO Asha Sharma. This is interpreted as a result of 'Avowed' not being classified as a core Xbox franchise and its sales failing to meet expectations.

This decision comes as the 'Fallout' series on Amazon Prime Video continues to see success. With Bethesda focused on the development of 'The Elder Scrolls VI' and the release of 'Fallout 5' still a distant prospect, Xbox appears to be looking to accelerate the development of its core franchises. According to Bloomberg's sources, Bethesda will also be involved in the new 'Fallout' project to some extent.

Meanwhile, Microsoft is currently undergoing a restructuring of its Xbox game studios alongside a broader wave of thousands of layoffs.