Xbox is 'keeping' Obsidian, has no plans to sell Fallout New Vegas studio

Obsidian Entertainment was said to be on the potential chopping block in Xbox's incoming layoffs, but those rumors may be wrong and Xbox may keep Obsidian.

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Derek Strickland

Senior Gaming Editor

Published Jul 2, 2026 1:31 PM CDT
Updated Jul 2, 2026 3:14 PM CDT

1 minute & 30 seconds read time

TL;DR: Obsidian Entertainment, known for Fallout New Vegas, is not being sold or shut down amid Xbox's upcoming layoffs. Xbox plans to retain Obsidian, valuing its RPG expertise and contribution to Xbox Game Pass, with potential future involvement in core franchises like Fallout under new CEO Asha Sharma.

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Beloved Fallout New Vegas studio Obsidian Entertainment is reportedly safe from closure in Xbox's upcoming layoffs.

Xbox is 'keeping' Obsidian, has no plans to sell Fallout New Vegas studio 1

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New reports say that Obsidian Entertainment may be one of the studios that could be sold--or even shut down--as part of Microsoft's impending Xbox layoffs. Now trusted Bloomberg reporter Jason Schreier has clarified that this isn't the case.

"Despite a report this morning, I can confirm that Obsidian is *not* in negotiations to avoid shutting down. Plenty of details are still up in the air surrounding the layoffs (picture will be clear on Monday) but Xbox is keeping Obsidian, according to people familiar with the situation," Schreier said this morning on BlueSky.

Read more: Xbox first-party studio closures target Compulsion Games, Double Fine and more, studios negotiating for independence

Obsidian remains one of the strongest studios at Microsoft's internal Xbox Game Studios org insofar as talent and flexibility; the studio has created multiple games in the RPG genre with a myriad of experiential offerings, from simulation games like Avowed and Fallout New Vegas to cRPGs like Tyranny and Pillars of Eternity.

Obsidian's long-winded content also makes for good playtime engagement, which has been a pivotal metric for Microsoft's Xbox Game Pass subscription.

It's also said that Xbox's new CEO Asha Sharma is investing more heavily into core franchises. Fallout is said to be among these IPs, and while there might still be some residual tension between Bethesda and Obsidian over the old New Vegas bonus situation, it's possible we could see Obsidian return to the series in some form.

In recent years, companies have shown a willingness to give fans what they want. This is especially true for Xbox, which has returned to game exclusivity and attempted to capture goodwill among fans with other moves like brand name changes and updates to the Xbox console UI.

Frequently Asked Questions

TweakBot answers common questions about this news using TweakTown's own coverage from this page and related content from our archive. Tap a question to reveal the answer, or type your own below.

Question 01

Will Obsidian’s ongoing projects like Avowed remain exclusive to Xbox Game Pass after the reorganization?

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Question 02

Could Obsidian be reassigned to lead development on future Fallout titles under Microsoft’s focus on core franchises?

Yes. The article says Xbox is keeping Obsidian and that Microsoft’s new CEO is investing more heavily into core franchises including Fallout, noting it is possible Obsidian could return to the series in some form. Related article referenced: "Xbox prioritizes Elder Scrolls VI, Fallout, and Halo in new strategy shift."

Answered

Question 03

How might Xbox’s reported emphasis on playtime engagement affect Obsidian’s game design priorities or scope?

Xbox’s emphasis on playtime engagement could push Obsidian to prioritize longer, content-rich RPG experiences that maximize hours played, reinforcing its focus on expansive narratives and replayability. This alignment may also justify keeping or expanding scope on projects that drive Xbox Game Pass metrics, such as bigger worlds or more emergent systems, rather than smaller, shorter releases.

Answered

Question 04

If tensions over the New Vegas bonus resurface, what internal changes at Obsidian or Bethesda could Microsoft implement to mitigate them?

Microsoft could reduce or eliminate tensions by assigning Obsidian more direct work on the Fallout franchise or bringing it back into the series, since Xbox is investing more heavily into core franchises including Fallout. They could also increase collaboration or resource support between Bethesda and Obsidian under the new Xbox leadership, which prioritizes big franchises and has shown willingness to reorganize studios. (Related: Bethesda has 'huge respect' for Obsidian, Todd Howard says)

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