
Talent under Microsoft/XBOX is going through a new change with the recent wave of layoffs that took place this week. At XBOX Game Studios, four developers are to be out the door officially: Undead Labs & Ninja Theory are being sold off whilst Compulsion Games & Double Fine Productions are returning to being independent. Bethesda also faces major changes with new focus for hallmark IPs Doom, Quake, Wolfenstein, Fallout, and The Elder Scrolls is its current objective to expedite.
Under the Bethesda banner specifically, id Software was hit a sizable amount in the layoffs. Roughly 136 employees were let go from the decision and are described as “nuking a team into the dirt.” However, the team did release a statement sharing that it is now to the same number of staffing as Doom (2016). Projects that are likely not to progress are new action shooter IP ‘Fury’, Doom co-op title, and a new Perfect Dark also.
Similarly, Obsidian Entertainment was also affected with a total of 52 employees being affected by the latest layoff wave. The maneuver also was reported to sever chances of its efforts on an Avowed sequel in favor for a new Fallout assigned by XBOX leadership. According to Chris Avellone (Fallout: New Vegas) on X, the Avowed sequel is not fully dead just yet. But, Pillars of Eternity – the series Avowed is based around – is not looking to have a future any time soon if not any further.
Aside from other news, Obsidian employees appear to have been told all the company’s projects were “re-evaluated” today.
It seems Grounded is still going (mostly out-sourced in Eidos Montreal anyway, so no surprise), Outer Worlds 2 expansions still planned for now (1st one is…
— Chris Avellone (@ChrisAvellone) July 8, 2026
In a response to his post, Avellone defends that the game is still in active development. Describing the project to have already been invested greatly in and Obsidian Entertainment is renegotiating to keep the title from going under the water. “They’re still working on it as of today, according to folks at Obsidian. They’re trying to “re-pitch” it when the dust settles, probably because so much work was already put into it.”
As for other IPs like Grounded, the live-service is told to still be receiving support. But, Eidos-Montreal will handle the title while majority of Obsidian Entertainment focuses on its new Fallout project and DLC for The Outer Worlds 2. Pillars of Eternity, the unique series that stood out from the likes of The Elder Scrolls, is the most unfortunate of the franchises as Avellone was told by sources that is not part of the plan and only has hope for a new installment if Avowed 2 moves forward to some capacity.
Do you believe that Obsidian Entertainment will prevail with any of its other projects outside of Fallout?







