Obsidian’s New Fallout Game May Be Coming at the Worst Possible Cost

As rumors swirl around Xbox’s future, the latest news (or leak) is that Microsoft has tapped developer Obsidian Entertainment to carry on the Fallout series. While this is exciting for many reasons, not the least of which is Obsidian’s potential return to its Fallout: New Vegas setting, it’s devastating news for fans of Obsidian’s other IPs; specifically, Avowed and Pillars of Eternity. Anyone out there who was looking forward to Avowed 2 or another PoE spin-off may have to put those dreams on hold for now.

Avowed is, of course, set in Obsidian’s in-house universe, sharing the same setting as Pillars of Eternity despite not acting as a direct sequel to Pillars of Eternity 2: Deadfire. As reported by Jason Schreier, Obsidian was already well underway developing Avowed 2, despite the first game only being released in 2025. However, the news that Obsidian would be taking over the next Fallout game came with the less exciting news: to make room for that game’s development, Avowed 2 was canceled.

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This move from Xbox begs the question whether we even need a new Fallout game from Obsidian. After all, Bethesda confirmed that it was also working on Fallout 5, so one wonders if both projects are truly necessary, especially if they’ll be releasing close together. That’s no guarantee, as Bethesda is likely feeling more heat over finishing The Elder Scrolls 6, but it’s a possibility. If that were the case, Xbox would be setting up one of its most valuable IPs to compete with itself, risking fan fatigue in the process.

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Then again, this shift to Obsidian could mean that Bethesda is now exclusively focused on The Elder Scrolls 6, and Obsidian will handle the next Fallout game. That would represent a significant shift in the Xbox power structure, but given Obsidian’s recent work compared to Bethesda’s, it’s not entirely unprecedented. It has been over 10 years since Fallout 4, and eight years since​​​​​​Fallout 76. Meanwhile, there’s a hugely popular Fallout series on Amazon Prime that Bethesda has failed to capitalize on; well, other than a 10th anniversary edition of Fallout 4. Maybe some fresh eyes are exactly what the franchise needs.

As for Obsidian, this news is likely as fresh to their team as it is to us. After all, these reports did not give the impression that development was well underway; this new Fallout game is just getting started. One wonders if this new project is really the best direction to push a studio like Obsidian. With a remaster of both Fallout 3 and Fallout: New Vegas confirmed alongside Fallout 5, New Vegas 2 may be a redundant direction for the series. Granted, we don’t know that New Vegas 2 is what Obsidian has been tasked with, but it seems like an obvious direction to take given the severity of Xbox’s situation. Fallout: New Vegas is, after all, one of the most beloved games in the franchise.

Obsidian Is an Efficient And Capable Developer With a Stellar Track Record

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Image via Obsidian Entertainment

Quietly, almost imperceptibly, Obsidian Entertainment has become one of the most consistent developers in the gaming industry. Despite a frequent lack of funding and a heavy reliance on word-of-mouth sales over launch-day milestones, this is a studio that bleeds quality at every turn. Starting with Pillars of Eternity in 2015, when the team moved away from primarily licensed IPs, Obsidian has been on a decade-long streak of exceptional releases. Frankly, that streak could extend back to its debut with Star Wars Knights of the Old Republic 2: The Sith Lords, although Dungeon Siege 3 is a notable stumble within that span. There is little reason to wonder why Xbox is looking to Obsidian for its next Fallout game; these are devs that know what they’re doing.

It’s also worth noting that in 2025, Obsidian released three major titles that it developed in-house: Avowed in February, Grounded 2 (Early Access) in July, and The Outer Worlds 2 in October. This lends credence to the rumors that, despite being canceled, a small team at Obsidian will continue work on Avowed 2 while most of the staff moves over to Fallout. After all, if the game is nearly finished by the time Obsidian’s new Fallout launches, there’s a good chance Xbox will acquiesce and release Avowed 2 as well for a cheap and painless win.

Despite the chaos surrounding it, this announcement could be a watershed moment for Obsidian. There is little doubt that a new Fallout game will be a hit, but there’s a very real chance that Avowed 2 could be as well. The first Avowed was very good. Flawed, yes, but boasting exceptional gameplay, especially for a studio known more for its writing and narrative expression. The issues were mostly systems-based: a progression system that felt stunted, a reliance on gear upgrades over character leveling, and an overarching narrative that felt a little too safe, even if the disparate elements were very well done. These are all issues that a sequel could easily iron out, all while expanding on Avowed’s standout combat and platforming.

Look no further than The Outer Worlds 2 for what this studio can do with a sequel. The first game was fun, but also flawed. It was an interesting mix of Fallout and Mass Effect, but it felt restrictive in its world design, combat became a bit same-y by the final act, and (once again) the overarching story felt uninspired, even if the characters within it were brilliant. The Outer Worlds 2 solved almost all of this. Combat was much improved (with some of the weirdest weapons you’ll ever find in an FPS), the game world felt expansive and alive, and the narrative was easy to get invested in. Cut and paste those same changes into Avowed 2, and Obsidian could easily have a sleeper hit quietly brewing in the background.