Obsidian's New Fallout Game: Biggest Leak Takeaways

Do you want the good news or the bad news first? Well, Obsidian is working on a new one Fall-out game. However, the project seems to have come about due to layoffs, restructuring, and a shift toward safer gaming. Jason Schreier's Bloomberg article revealed the existence of this project, which appears to still be in its early days and was not planned until recently.

Frankly, this news should be among the most exciting of 2026, but its circumstances undermine any natural hype. At the moment, Microsoft's Xbox division has not confirmed anything about the upcoming RPG, and there probably isn't much to confirm; still, we know a few things because Fall-out leak, assuming they are correct.

Josh Sawyer is reportedly set to direct

Fallout New Vegas project manager

Ceremonial as this disclosure has been, Fall-out fans can at least pick up on one intriguing detail in Schreier's report: John Sawyer appears to be touching the ship. For the uninitiated, Sawyer was Fallout: New Vegass project manager and lead designer, and he has an impressive resume dating back to before Obsidian's founding, working on the Black Isles Icewind Dale. Over the years, the developer served as project manager for Fallout: New Vegas and both Pillar of Eternity games, all of which are considered great RPGs of all time.

According to the report, Sawyer was working on a game that was similar Fall-out universe but was its own thing, although that project is probably now canceled or on the back burner. Of course, video game development involves hundreds, if not thousands, of contributors, and a title's success or failure cannot be credited to a single person; But Sawyer's track record speaks for itself, with every match on his resume being at least “good.”

Despite Sawyer's involvement, this is not a case of New Vegas team returns for more.

The move was forced by Xbox's new CEO

The new direction

Image via GameRant

In February 2026, Phil Spencer resigned as Xbox CEO, and the role was taken by Asha Sharma. Such a big change usually results in changes in priorities and structure, and Microsoft's Xbox division is no exception. One of the CEO's earliest announcements was a reduction in Game Pass Ultimate's subscription price, a decision that was unsurprisingly well received by players.

According to the one available account, the Obsidians are new Fall-out The game is not a passion project but rather a mandate from the Xbox CEO. This decision arose mainly from the disappointing sales of the developer's latest game Avowed and The Outer Worlds 2. As good as Obsidian's RPGs consistently turn out to be, the developer is unfortunately no stranger to commercial disappointments, though titles like Based proved to be success stories.

Doubling down on established franchises appears to be the new strategy, not so different from Xbox's historical reliance on its core first-party IPs as Halo, Gears of Warand Forza.

Obsidian has reportedly lost 25% of its staff

The cost of the pivot

Xbox preceded Schreier's report by a day and reportedly let go of a significant percentage of Obsidian's employees, and the studio wasn't the only one to suffer layoffs. This news reflects Microsoft's decision to restructure its divisions, resulting in seemingly smaller teams that will focus almost entirely on new games in established franchises that are more likely to be surefire hits.

Typically, AAA developers divide their workforce to explore multiple projects at once, although the distribution is uneven. Based on everything that has come of July 2026 so far, that system is unlikely to be used by Xbox's studios, at least not in the immediate future.

Avowed 2 has reportedly been canceled (along with other games)

Fallout now, who knows later

The new one Fall-out the game has Obsidian's full attention, with all other projects being important. According to Schreier's report, the developer was exploring a sequel for the 2025s Avowed which would build on that RPG's foundation and engine, with the hope that a quick turnaround would be possible. This project appears to have been cancelled, along with other unspecified games that may have been in development.

Apparently it's a very small team that throws a little Avowed 2just to keep the sequel alive in case a revisit is possible in the future. That said, I wouldn't recommend getting your hopes up, as this sounds like a Hail Mary at this point.

Bethesda is partnering with Obsidian on development

To work together

Although presented as a bit of a footnote in the report, Schreier revealed that the plan is for Obsidian and Bethesda Game Studios to work together to create the new Fallout game, which is in line with Xbox and Scharma's directive to consolidate resources on a few franchises. Even if Fallout 76Staying power has far outstripped its terrible first impression, it's been more than a decade since the last traditional entry in the franchise, and Xbox even failed to capitalize on the hype surrounding Amazon's live-action series.

A previous report suggested that a Fall-out the game was canceled in early 2026, and we don't know if that project has anything to do with Obsidian or Bethesda's current efforts. Presumably Bethesda's top priority will be The Elder Scrolls 6which seems to have been stuck in limbo for years.