Obsidian Entertainment’s name surfaced in reports surrounding Xbox’s possible studio cuts, but the Avowed and The Outer Worlds developer is not believed to be facing the same immediate threat as several other teams. Jason Schreier says Microsoft intends to keep the RPG specialist, while the future of multiple Xbox studios remains unclear.
Reports of a major Xbox restructuring have been mounting for weeks, with possible studio closures, layoffs, spinoffs and sales all said to be under consideration. Obsidian Entertainment was initially mentioned among the teams caught up in the uncertainty, causing understandable concern given the California studio’s recent work on Avowed, Grounded and The Outer Worlds, as well as its earlier role-playing classics such as Fallout: New Vegas and Pillars of Eternity. Founded in 2003, Obsidian remains one of the most recognisable names in story-driven RPG development, so any suggestion of a possible closure quickly attracted attention.
Jason Schreier then offered an important clarification on Bluesky. The Bloomberg journalist said Obsidian is not negotiating with Microsoft to avoid closure and that Xbox intends to retain the studio based on the information currently available. Schreier also stressed that the details of the coming layoffs are still not fully settled, so this does not necessarily mean Obsidian will emerge from the restructuring entirely untouched. The key point, however, is that a shutdown or spinoff does not appear to be under discussion for the studio at this stage.
There is far less reassuring information about several other Xbox teams. According to sources cited by The Verge, Microsoft is weighing the closure of at least five studios, while Arkane, Compulsion Games, Double Fine, Ninja Theory and Undead Labs all face serious uncertainty. The report says that sales or independent continuations have been considered for some of these teams, but negotiations could take months and there is no guarantee that any of them will reach a positive outcome.
Xbox therefore has to make decisions that go beyond the fate of individual studios, as Microsoft is also reshaping the wider structure of its gaming business. Reuters previously reported that the company had considered options including spinning Xbox off or operating it as a separate subsidiary. In that context, holding on to Obsidian could be an important signal: Microsoft does not appear ready to abandon major role-playing game talent altogether, even as the next official announcements may decide which other studios remain within Xbox, become independent, or disappear from the group for good.
