Obsidian's scrapped IP was reportedly so similar to Fallout that Microsoft redirected it into a Fallout game

Obsidian Entertainment had reportedly already been developing a brand-new post-apocalyptic RPG with no connection to the Fallout licence when Microsoft cancelled it. However, the studio was told to channel that work into an official entry in the franchise instead, as it was already "very Fallout-y in nature."

The details:

• According to Bloomberg's Jason Schreier, Obsidian was in development on a new original IP, a post-apocalyptic RPG that had no ties to the Fallout series, when Microsoft intervened following the Xbox restructuring. The project was described internally as spiritually close to New Vegas, functioning as a Fallout-style game in all but name.
• Rather than continue the original IP, Microsoft cancelled it and redirected the studio toward an official Fallout project in collaboration with Bethesda Game Studios. Bethesda confirmed the partnership in its July 17 statement.
• Avowed 2 was also cancelled as part of the same restructuring. The Obsidian sequel had been in early development following Avowed's February 2026 release.
• Josh Sawyer, director of Fallout: New Vegas, is heading the new Fallout project at Obsidian. The game is at the very start of development and is unlikely to surface publicly for several years.
• Approximately a quarter of Obsidian's staff were laid off in the July Xbox restructuring ahead of the pivot.