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Update []:
In a follow-up to this, Bloomberg reporter Jason Schreier has taken to social media to state that Obsidian isn't in negotiations to avoid shutting down, and that Xbox will be keeping the studio after all.
Phew!
Original Story: Sorry to be the bearer of bad news again, but a new report from The Game Business says that Obsidian is amongst the studios that are in negotiations with Microsoft to avoid being closed at Xbox Game Studios.
This seems to have come out of nowhere, with the Avowed and Outer Worlds developer having not been mentioned in previous reports, but as you can see below, The Game Business clearly believes they're involved in the process.
"The company wants to invest in its big franchises, and to do that, it needs to cut from elsewhere. Studios such as Compulsion, Ninja Theory, Double Fine, Obsidian, Undead Labs and others are deep in negotiation with Microsoft to avoid closure. The impact of this will likely reverberate across the business."
The full report is well worth a read if you're interested, as it goes into detail on the apparently downbeat behind-the-scenes vibe at Xbox Game Studios right now, and even quotes some people who are working as part of Team Xbox.
It suggests later how even if Obsidian had delivered an "incredible" year in 2025, it might not have made a difference:
"There’s a real sense amongst some teams that they’re being punished for the poor performance of Call of Duty. That is the reality. Even if Obsidian had delivered an incredible year, even if The Outer Worlds 2 and Avowed had performed five times the numbers that they did, it wouldn’t have offset the drop on Call of Duty. A game like that, and Candy Crush, and Minecraft, and Warcraft, make a lot of Xbox’s output seem almost insignificant."
Of course, we have to mention that this is just one report, and there's always a chance that the outlet could be mistaken or things could have changed behind-the-scenes prior to its publication. That said, this is a reputable website and they're directly quoting people at Xbox here, so they clearly have their sources.
We'll have to wait and see what happens, with the layoffs reportedly set to begin on July 6th (next Monday), and here's hoping we'll get some concrete information from Microsoft's leadership at the same time as well.