Obsidian Reportedly Expected to Survive XBOX Layoffs

If you've been keeping up with the XBOX drama this week, you've probably already heard the rumor that Obsidian was about to get swept up in a massive round of layoffs. A lot of people expected the studio to be spared, and that instinct turned out to be right, even though its recent track record hasn't exactly been strong.

Obsidian is responsible for two of XBOX's biggest financial disappointments over the last couple of years, and that makes its survival feel a little counterintuitive. Avowed and The Outer Worlds 2 both reportedly lost hundreds of millions of dollars.

The Outer Worlds 2 had a particularly rough launch.

XBOX originally wanted to charge you $80 for the game, then quietly dropped it to $70 about two weeks later, blaming "market conditions" for the change, the same market conditions they'd used to justify the higher price in the first place. Even at $70, the game still didn't sell the way they hoped.

So both games flopped. Despite that, Obsidian is expected to stick around, and here's the reasoning behind it. Companies like Microsoft and Sony, ones that own a whole portfolio of studios, tend to care more about legacy and brand value than short-term performance.

You can see the same pattern with Sony and Bungie, which recently cut around 300 jobs but wasn't shut down entirely despite losing serious money. The logic with Microsoft and Obsidian works the same way. It's less about what the studio is making right now and more about what it's already made.

The same thing is happening over at EA with BioWare. BioWare hasn't turned a profit in over a decade. Mass Effect: Andromeda lost money, Anthem lost money, and Dragon Age: The Veilguard lost a significant amount too. The studio is now betting everything on the next Mass Effect game, and if that one underperforms, things could get ugly fast, especially with EA reportedly moving toward going private.

So why does Obsidian keep getting protected despite the losses?

A big part of it comes down to bragging rights tied to Fallout: New Vegas. There are also rumors circulating about a possible New Vegas remaster, remake, or follow-up currently in the works, which makes holding onto the studio even more valuable from a branding standpoint.

Being able to say "from the makers of Fallout: New Vegas" is apparently worth more to XBOX than the money lost on Avowed and The Outer Worlds 2 combined, at least according to how this is playing out. Still, the shutdown rumors spread fast this week, and the timing lines up with a much bigger storm building at XBOX.

Since July 4th landed on a Saturday, industry insiders expect the real chaos to surface by Monday, when a fresh wave of XBOX layoffs is expected to become public. Everyone in the industry is bracing for what's coming, and right now, Monday is being treated like the day everything gets confirmed.

One bright spot for the studio has been Grounded, a survival game that's performed really well on Steam. Unfortunately, strong Grounded numbers probably aren't enough to offset how badly Avowed and The Outer Worlds 2 underperformed financially.

According to a recent report, Obsidian, described as a beloved RPG developer behind several cult classics, was rumored to be facing possible closure.

This is despite earlier talks with Microsoft aimed at keeping the studio open. Multiple outlets claimed XBOX was preparing for mass layoffs, game cancellations, and studio shutdowns in the near future. Compulsion Games, known for South of Midnight, Double Fine, known for Psychonauts, and Ninja Theory, known for Hellblade, were also named as studios reportedly negotiating to stay open.

A report claimed that Obsidian was on that same list, allegedly negotiating with Microsoft to avoid a shutdown, with fears that some XBOX-owned studios could get spun off, sold, or closed entirely. Journalist Jason Schreier pushed back on that report shortly after it circulated. He said he could confirm Obsidian wasn't actually negotiating to avoid being shut down.

According to Schreier, plenty of details around the XBOX layoffs are still unclear and won't be fully known until Monday, but people close to the situation say XBOX plans on keeping the studio. That said, it's worth separating two different things here. Being safe from closure doesn't mean being safe from layoffs. Obsidian could still lose staff even if the studio itself stays open, especially given how badly its last two releases performed.

Obsidian itself has built a strong reputation in the RPG space over more than two decades, first making a name for itself with sequels that sometimes outshone the originals, including Star Wars: Knights of the Old Republic II, Neverwinter Nights 2, and Fallout: New Vegas. It's worth noting that most of the people responsible for those classics aren't with the studio anymore.

Publishers love leaning on that history in marketing anyway, name-dropping old hits to soften how rough the last few years have actually been.

That includes a former director who left to join Netflix Games. She once said gamers should expect a certain level of jank in their games, essentially arguing that rough edges are just part of the experience. That comment didn't sit well with a lot of players, who felt like it sounded like an excuse for shipping unpolished games rather than owning up to it.

Not everyone agrees that jank is a dealbreaker. Plenty of people genuinely enjoy janky games, but liking a janky game doesn't mean the game isn't broken. Those are two separate things. Netflix Games, for what it's worth, hasn't exactly taken off either. Outside of a couple of titles, most of its lineup leans mobile-style, nothing that's really pulling people to the platform specifically to play games.

After being acquired by Microsoft back in 2018, the studio went on to build its own franchises, including Pillars of Eternity, Avowed, The Outer Worlds, Pentiment, and the two Grounded games. Nearly every major publisher has been chasing multiplayer hits lately, and this studio actually landed two of them with a survival series in a single console generation, which is part of why shutting it down would have been such a significant loss for XBOX.

All of this is unfolding as Asha Sharma talks about a company-wide reset amid ongoing internal turmoil and the looming threat of more XBOX layoffs. For now, the studio appears to be safe from closure, but nothing is fully confirmed until Monday, when the full scale of the cuts across XBOX is expected to come out.