The fallout of Xbox’s big reset continues. This time, the news is coming out of Obsidian Entertainment, which has reportedly cancelled multiple projects and pivoted to working on a new Fallout game.

Word comes via Jason Schreier at Bloomberg. In his new report, Schreier reveals that as part of the reset, roughly a quarter of Obsidian has been let go. Avowed 2, which Obsidian had officially confirmed was in development, has apparently been cancelled along with other unannounced projects.

But here’s the biggest surprise: the team is apparently pivoting to creating a new Fallout game, led by director Josh Sawyer who previously served as project director on Fallout: New Vegas before moving on to the Pillars of Eternity games.

According to Schreier, Sawyer had been directing a roleplaying game that was “similar structurally and thematically to Fallout but was not part of the franchise.”

In other words, if Obsidian is going back to Fallout, it has the right guy directing it. And let’s not forget that the man who created Fallout, Tim Cain, rejoined Obsidian in a full-time role back in December, 2025. At the time, Cain confirmed he was already working on a project, but “Don’t bother guessing, you’re not going to guess right”, which felt like a way of telling us it wasn’t Fallout.

Obsidian is a fascinating studio within Xbox because it’s one of the few developers that has been consistently putting out games, including somehow managing to launch 3 in 2025. However, both The Outer Worlds 2 and Avowed didn’t sell well.

Microsoft is apparently looking to focus on its big franchises such as The Elder Scrolls and Fallout. It’s been insane to think that the Fallout TV show has gone through 2 seasons without any game being launched to capitalise on its success.

Mind you, the news that Obsidian is spinning up a Fallout game probably won’t change that, because if it’s a brand new triple-A title, it’ll likely be another 4-6 years before it launches.