Is yet another Microsoft studio, Obsidian, negotiating with Xbox to avoid closure? Conflicting reports emerge

A report from The Game Business initially claimed that Obsidian Entertainment was negotiating with Microsoft to avoid closure as part of Xbox’s controversial business restructuring. However, Bloomberg reporter Jason Schreier quickly disputed this claim, stating that Obsidian is not in negotiations to shut down and that Xbox is keeping the studio.

The conflicting reports emerged amid a broader wave of layoffs at Xbox Game Studios announced for early July. Multiple studios are confirmed to be at risk, including Arkane Studios, Double Fine, Compulsion Games, Ninja Theory, and Undead Labs. Compulsion Games, developer of South of Midnight, appears to have already been affected by the cuts on July 6.

Obsidian, known for developing acclaimed titles including Fallout: New Vegas, The Outer Worlds, Avowed, and Grounded, was initially caught in speculation about potential closure. However, according to sources familiar with the situation, the studio remains safe under Xbox’s ownership despite the broader restructuring.

The layoffs reflect a larger “reset” of Xbox’s business strategy, with some teams reportedly feeling punished by the poor performance of Call of Duty. While the full scope of the restructuring remains unclear, July 6 marked the beginning of the confirmed layoffs affecting multiple studios within Xbox Game Studios.

Is yet another Microsoft studio, Obsidian, negotiating with Xbox to avoid closure? Conflicting reports emerge

Sources