The ongoing reorganization of Microsoft’s gaming division is affecting not only employee numbers and the fortunes of individual studios, but also the internal structure of Xbox. One of the most notable decisions was the change in stance Obsidian Entertainment: The studio will now be located within Bethesda and report directly to its president Jill Braff. At the same time, Microsoft emphasized that this is mainly to change the control system, rather than the Bethesda Game Studios team absorbing Obsidian.
This is an especially noteworthy shakeup for Obsidian due to its history. The studio is known for projects like Grounded, Pentiment, and Avowed, but it Fallout: New Vegas Still one of Obsidian’s most famous works. Therefore, against the backdrop of the transformation under Bethesda, a new Fallout game appearing in the developer’s plans will inevitably generate additional interest.
Bethesda itself has rushed to explain to employees that the changes should not cause Obsidian’s corporate image to disappear. The president stated in the letter Bethesda Jill Braff wrote to the team to stress that Fergus Urquhart and current management will continue to lead the studio and that its creative identity and strengths will remain intact. Meanwhile, Obsidian itself will now report directly to Braff.
Pay special attention to Fallout. Bethesda Game Studios will continue to be directly responsible for development of the series, while Obsidian will continue to work with the team on a new project. Braff also confirmed that early work on a new Fallout game is already underway and provided more details Microsoft and Bethesda will reveal it in the coming months.
So we are discussing a rather unusual scenario. Obsidian is under new management, but its own executives retain control of the studio, and Bethesda Game Studios Remain responsible for the Fallout series itself. Braff said the structure should simplify the distribution of responsibilities between the studio and IP owners while maintaining long-term collaboration between the two teams.
For Fallout fans, this is especially interesting in the context of Fallout: New Vegas. Obsidian was responsible for the game, which was released in 2010, and fans have repeatedly asked the studio to return to the series since then. Now such a project is indeed in development, although it’s unclear whether it will be a direct continuation of New Vegas, a new standalone installment, or an entirely different game within the Fallout universe.
The changes surrounding Obsidian are just part of a larger overhaul of Xbox. In July, Microsoft announced plans to lay off approximately 3,200 employees in fiscal 2027, including approximately 1,600 immediately. In September, the company announced another 268 layoffs and said that about three-quarters of its restructuring plan had been completed.
At the same time, Microsoft is redistributing responsibilities across franchises and studios. The next big Halo game is now being run by a new division under Activision, and a small team halo studio Already released projects will continue to be supported. Rare and World’s Edge will also come under Activision Blizzard’s expanded management. Playground Games and Turn 10 are partnering with Forza and Fable.
These changes also affect the independence of individual developers. Compulsion Games and Double Fine are returning to independent management along with their IP, and Undead Labs is leaving the Xbox infrastructure to new owners and will continue to develop State of Decay 3. Ninja Theory’s situation is more complicated: After two deals fell through, Microsoft began negotiating the possibility of closing the studio while continuing to explore other options.
Against this backdrop, Obsidian’s transition to Bethesda appears to be part of Microsoft’s larger strategy to reduce the number of independent management structures and tie development more closely to key franchises. Meanwhile, for its part, Obsidian remains committed to maintaining the independence of the team and its current projects. The main new direction of cooperation is “Afterlife”, the first work of the game has already begun. Bethesda promises to reveal what happens in the coming months.
