Microsoft has reportedly canceled the sequel to Obsidian Entertainment's upcoming RPG, Avowed. The studio, known for titles like Fallout: New Vegas and The Outer Worlds, will now pivot to developing a new Fallout game. This shift comes as part of broader restructuring within Microsoft's Xbox division, which has seen significant layoffs across its gaming studios.

Development of the new Fallout title is reportedly being helmed by Josh Sawyer, the director of Fallout: New Vegas and Pentiment. This move aligns with Microsoft's stated strategy to concentrate its studios on established franchises such as The Elder Scrolls, Doom, Wolfenstein, and Fallout. The timing is particularly relevant, given the recent success of the Fallout TV series on Amazon Prime Video, which may drive renewed interest in the franchise.

Obsidian Entertainment is laying off approximately 25 percent of its workforce, totaling around 52 employees. This includes 43 employees in Irvine, California, and nine remote employees. This follows news of layoffs at id Software, another Xbox studio. These workforce reductions are part of new Xbox CEO Asha Sharma's efforts to address challenges within Microsoft's gaming business.