Xbox could've had the next Baldur's Gate 3, but just killed its best shot

Obsidian has a superpower any publisher would kill to have right now

This week, Xbox announced a sweeping overhaul of its business that will see the company cutting 3,200 total jobs by next summer. That decision has already led to catastrophic results for studios under Xbox that have reportedly been gutted, including Doom developer Id Software. Obsidian Entertainment especially took a hit as part of the first layoff wave, losing 25% of its staff amid a major shake-up in the studio’s direction. According to a Bloomberg report, the remaining team has been tasked with making a new Fallout game as Xbox tightens its focus on its biggest IP. As a result, that directive reportedly means the team will be pushing aside some projects it was working on, including a sequel to 2025’s Avowed.

As with everything surrounding Xbox at the moment, the details are hazy. Some reports note that the team intends to keep tinkering with the project in the background with hopes of re-pitching it eventually, but all signs indicate that it’s not a priority for Microsoft right now. It’s disappointing to think that the team may not get a shot at Avowed 2 after building such a sturdy foundation that begged to be reinforced. Even more frustrating, though, is that Xbox seems all too ready to squander the world Avowed is built on at the worst possible moment.

Though Avowed was the start of a new series in 2025, the RPG actually exists within Obsidian’s Pillars of Eternity universe. Introduced in 2015’s Pillars of Eternity, the series centers around the fictional world of Eora. In many ways, Eora is a standard high-fantasy realm, but one plagued with supernatural phenomena and religious conflict. The most fascinating detail of the universe is that it doesn’t have true gods. Rather, it has artificial ones created by an ancient race to engineer a sense of moral order. That juicy idea sets it apart from your typical Dungeons and Dragons universe.

That premise made for a killer CRPG. Pillars of Eternity launched to rave reviews in 2015. At the time, it felt like the start of a renaissance for the genre, calling back to classic PC RPGs like Baldur’s Gate. Obsidian capitalized on that momentum in 2018 with Pillars of Eternity 2: Deadfire. Though it wasn’t a financial hit out the gate, it found an audience that launched the series to cult status.

The series seemed to go quiet when Microsoft acquired Obsidian in 2018, as the studio worked on games like The Outer Worlds and Grounded. It finally reemerged in 2025 with Avowed, which told a new story in Eora centered around a deadly plague. Though the RPG’s compact scope was polarizing to those who were expecting a dizzyingly vast open world to rival Elder Scrolls, Avowed served as an excellent introduction to an intimidating CRPG universe. It felt like Pillars of Eternity was poised for a mainstream moment that Xbox could build on. That no longer seems to be the plan, considering that Obsidian is now reportedly working on a new Fallout game.

There was a time when that decision would have seemed sensible, if not inevitable. CRPGs can be a niche genre for PC enthusiasts, not so much something built for Xbox Series X owners. On paper, it makes more business sense to pass a very popular IP to the team that arguably created the most-revered Fallout game, New Vegas.

Xbox’s timing feels entirely off, though. In 2023, with Baldur’s Gate 3, Larian Studios proved that there is still a major hunger for CRPGs. The award-winning game helped more players discover the joys of a dense, choice-driven adventure set in a fleshed-out fantasy universe. Few games have tried to capitalize on its success in the following years, but that’s because few studios have the means to do so. (Even Hasbro, which controls the IP by way of Wizards of the Coast, is struggling to find a studio that is willing to make Baldur’s Gate 4.)

Building an engrossing universe that can fill a giant RPG isn’t something that happens overnight. It requires a talented team that can build that world and construct a reactive game around it where your choices feel like they have an impact on everything around you. Obsidian is the rare studio that had all the tools needed to build that game — a strong sense of worldbuilding, a passion for sticky RPG systems, and a mastery of choice-driven narrative systems. That particular set of skills is how you arrive at “the next Baldur’s Gate 3.” Instead, the team is left working on Fallout as it sorts through the aftermath of a careless layoff wave.

It’s just one of many decisions that signals that Microsoft doesn’t know what it has with its gaming brand. Pillars of Eternity is the kind of universe any publisher would kill to have right about now. Whether it could be used to power a buffed-up Avowed 2 or cater to an underserved market with a proper CRPG, Xbox is sitting on potential gold. To realize that, you need to be able to look at the gaming landscape beyond the Xbox ecosystem and feel which way the winds are blowing. Xbox’s drastic reorganization leaves me doubtful that the people in charge have enough of a grasp on the trends to lead the brand into a shifting future. A Fallout game that likely drops years after the series’ mainstream Prime Video moment isn’t going to save Xbox. But know what could? Talented developers who actually get what their players want, if given the trust and resources to work their magic.