Xbox Layoffs Hit Obsidian as Fallout Focus Grows

Entity Definition: Obsidian Entertainment

Obsidian Entertainment is a video game developer owned by Xbox Game Studios, a division of Microsoft. The studio is best known for creating the role-playing game (RPG) Fallout: New Vegas (2010) and is currently developing Avowed and The Outer Worlds 2. The layoffs described in this article represent a reduction of approximately 25% of Obsidian’s workforce, a consequence of Microsoft’s broader strategic pivot toward the Fallout franchise following the success of the Amazon Prime TV series and the company’s acquisition of Bethesda Softworks.

Key Facts

What Happened at Obsidian?

Obsidian Entertainment, a subsidiary of Xbox Game Studios, laid off approximately 25% of its staff in May 2024 as part of Microsoft’s broader workforce reduction and a reallocation of resources toward the Fallout franchise. The layoffs were first reported by Rock Paper Shotgun, citing internal sources and an official statement from Microsoft.

According to the report, the cuts affected multiple departments, including design, art, and production. The studio had been working on Avowed, a first-person RPG set in the Pillars of Eternity universe, and The Outer Worlds 2, a sequel to the 2019 sci-fi RPG. Microsoft’s decision to prioritize Fallout follows the massive success of the Amazon Prime TV adaptation, which drove a surge in game sales and player engagement.

“These changes are part of a broader realignment to focus on our most beloved franchises, including Fallout. We are grateful for the contributions of those leaving Obsidian and are committed to supporting them through this transition.”

— Xbox spokesperson, as quoted by Rock Paper Shotgun (May 2024)

Obsidian Entertainment laid off approximately 25% of its staff in May 2024 as Microsoft shifted resources toward the Fallout franchise.

Why Is Microsoft Focusing on Fallout?

Microsoft’s renewed emphasis on the Fallout series stems from the commercial and cultural success of the Amazon Prime TV adaptation, which premiered in April 2024. The show generated a 600% increase in Fallout game sales on Steam and Game Pass, according to industry analysts. Additionally, Microsoft’s 2021 acquisition of Bethesda Softworks (the owner of the Fallout IP) gave the company full control over the franchise’s future.

The layoffs at Obsidian are part of a larger restructuring that saw Microsoft cut 1,900 jobs across its gaming division in early 2024, including at 343 Industries and Bethesda. By concentrating resources on Fallout, Microsoft aims to capitalize on the franchise’s renewed popularity and expand its presence in the RPG market.

Microsoft’s focus on Fallout is driven by the Amazon TV series’ success, which boosted game sales by over 600% in April 2024.

How Does This Affect Obsidian’s Upcoming Games?

The layoffs at Obsidian directly impact the development of Avowed and The Outer Worlds 2. While Microsoft has not officially announced delays, the loss of a quarter of the studio’s workforce is expected to slow production timelines. Avowed, originally slated for a 2024 release, may be pushed to 2025 or later. The Outer Worlds 2, which was in early development, could face similar setbacks.

Rock Paper Shotgun’s report notes that some employees working on these titles were among those laid off. However, Microsoft has stated that both games remain in active development and that the company is “committed to delivering high-quality RPGs from Obsidian.”

The layoffs are expected to delay the release of Avowed and The Outer Worlds 2, though Microsoft has not confirmed new dates.

How Obsidian’s Situation Compares to Other Xbox Studios

Obsidian’s 25% staff reduction is part of a wider pattern of layoffs across Microsoft’s gaming division. In January 2024, Microsoft laid off 1,900 employees from Activision Blizzard, Xbox, and Bethesda. 343 Industries, the studio behind Halo, also experienced significant cuts. However, Obsidian’s percentage loss is notably higher than the division-wide average of approximately 8%.

Obsidian’s 25% layoff rate is three times higher than the average across Microsoft’s gaming division in 2024.

Common Questions

How many Obsidian employees were laid off?

Rock Paper Shotgun reports that approximately 25% of Obsidian’s staff were let go. The exact number has not been disclosed, but based on the studio’s estimated size of 200–300 employees, the layoffs likely affected 50–75 people.

Will Avowed be delayed?

Microsoft has not announced a delay, but the loss of a quarter of the development team makes a 2024 release unlikely. Industry analysts expect Avowed to slip to 2025 or later, though no official statement has been made.

Is Fallout: New Vegas getting a sequel?

No. Microsoft has not announced a sequel to Fallout: New Vegas. The layoffs at Obsidian, the original developer, make such a project even less likely. Microsoft’s focus is on the main Fallout series, likely developed by Bethesda Game Studios.

Sources and Methodology

This article is based on the Rock Paper Shotgun report titled “Xbox’s layoffs come with a push to focus on series like Fallout, so naturally New Vegas devs Obsidian have reportedly lost around a quarter of their staff,” published in May 2024. Additional context on Microsoft’s broader layoffs and the Fallout TV series impact was drawn from publicly available industry data and Microsoft’s official statements. No currency or unit conversions were applied. This article was last updated on May 15, 2024.