On September 22, 2026, Xbox announced on Xbox Wire that Obsidian Entertainment, the first-party studio behind Grounded and a new, unnamed Fallout project, is moving under Bethesda’s remit. The same post, a memo from Matt Booty titled “Continuing Our Reset,” confirmed 268 more role eliminations across Xbox’s studios. For Xbox owners, the short answer is this: Xbox did not announce an Obsidian closure, and it said the studio will continue its current projects.
What Happened
The official source is Xbox’s own post, Continuing Our Reset, published September 22, 2026. It confirmed four things that matter to Obsidian fans.
1. There are 268 more role eliminations. Xbox said the cuts span Halo Studios, other first-party studios, and Xbox Game Studios management and central functions. These 268 are additional cuts that count toward Xbox’s previously announced restructuring target: PC Gamer reports that Booty says it brings Xbox “roughly three-quarters of the way” to completing its planned 3,200 job cuts. Of the headcounts in this story, only the 268 comes directly from Xbox’s post.
2. Obsidian now reports into Bethesda. Xbox’s wording is that “Bethesda will expand its remit to include Obsidian, which will continue its current projects.” Xbox’s post does not spell out whether Obsidian stays a separate studio. That detail comes from a leaked Bethesda memo reported by Polygon (below), which says the two remain separate studios and that the change is primarily one of reporting structure.
3. Grounded and a new Fallout project continue. Xbox named both projects as ongoing. The Fallout project is being developed in collaboration with Bethesda Game Studios. Xbox gave no title, release date, platform list, or pricing for it.
4. Other studios moved at the same time. Obsidian’s change was one piece of a wider reshuffle announced the same day:
- Rare and World’s Edge move under Activision’s remit.
- Activision will develop the next Halo game, while a small team at Halo Studios keeps supporting the Halo games already on sale.
- Playground Games and Turn 10 come together as one studio focused on Forza and Fable.
- Xbox will begin consultation with Ninja Theory employees on a proposed closure after two separate agreements for the studio fell through.
- Undead Labs has transitioned to a new publisher and will still release State of Decay 3 day one on Game Pass.
The memo Polygon reported a day later
On September 23, 2026, Polygon reported on a leaked internal memo from Bethesda head Jill Braff, first obtained by IGN. According to Polygon, the memo calls the move “primarily a change in reporting structure.” Polygon’s report says Obsidian keeps “the creative identity and strengths that make Obsidian distinct,” and that the two teams will work closely together on the new Fallout project while remaining separate studios. GamesRadar+ quotes the same memo as saying Feargus Urquhart and Obsidian’s leadership team will continue to lead the studio, reporting to Braff, and that Bethesda Game Studios will continue to lead the Fallout franchise.
Keep the sourcing straight. The Xbox Wire post is an official public statement. The memo is secondary reporting, because Polygon describes a document that Xbox has not published. The memo is consistent with the Xbox Wire post, but only Xbox Wire speaks for Xbox on the record.
What’s confirmed and what isn’t
The biggest source of confusion is a layoff headcount tied to an earlier round in July 2026. Kotaku reported on July 6, 2026 that somewhere around 60–70 people, roughly a quarter of Obsidian, were being let go. Xbox declined to comment on specifics, so treat 60–70 as a reported figure, not an official one.
| Claim | Status | Source |
|---|---|---|
| 268 role eliminations announced Sept. 22, 2026 | Official | Xbox Wire, “Continuing Our Reset” |
| Obsidian moves under Bethesda’s remit | Official | Xbox Wire |
| Ninja Theory proposed closure consultation; Undead Labs moves to a new publisher | Official | Xbox Wire |
| Grounded and new Fallout project continue | Official | Xbox Wire |
| Change is “primarily a change in reporting structure” | Reported (internal memo) | Polygon, Sept. 23, 2026 |
| Obsidian and Bethesda Game Studios remain separate studios | Reported (internal memo) | Polygon, Sept. 23, 2026 |
| ~60–70 Obsidian staff (~25%) cut in July 2026 | Reported, not confirmed by Xbox | Kotaku, July 6, 2026 |
| Release date, platforms, or Game Pass status for new Fallout project | Not announced | No source |
Who this affects
Xbox’s announcement lists no changes for anyone who already owns Obsidian games on Xbox Series X|S or through the Xbox app on Windows. The Xbox Wire post says nothing about delistings, store changes, or catalog removals. It also names no cancelled games and says nothing about the Game Pass catalog. Which Obsidian games are included still depends on the title and on your Game Pass plan (Essential, Premium, or Ultimate), and catalog moves are a separate monthly story.
The people most affected are:
- Obsidian and Xbox staff. The 268 official cuts and the earlier reported July round hit their jobs directly.
- Fallout fans. Obsidian is now under Bethesda’s remit and is collaborating with Bethesda Game Studios on the new Fallout project. That is the clearest practical effect of the move.
- Grounded players. Xbox named Grounded as continuing, so the official record gives no sign of a pause.
How It Stacks Up
The fairest comparison is with the other studio moves from the same announcement, because they all come from one official source on one date. Obsidian’s change is one of the milder ones.
| Studio / franchise | What changed on Sept. 22, 2026 | Source |
|---|---|---|
| Obsidian Entertainment | Moves under Bethesda’s remit; Grounded and new Fallout project continue | Xbox Wire |
| Rare | Moves under Activision’s remit | Xbox Wire |
| World’s Edge | Moves under Activision’s remit | Xbox Wire |
| Halo (next game) | Activision develops it; a small Halo Studios team supports in-market Halo games | Xbox Wire |
| Playground Games + Turn 10 | Come together as one studio for Forza and Fable | Xbox Wire |
| Ninja Theory | Consultation on a proposed closure | Xbox Wire |
| Undead Labs | Moves to a new publisher; State of Decay 3 still day one on Game Pass | Xbox Wire |
Two things stand out.
Obsidian keeps its studio. Halo’s next game changes hands. Activision will develop the next Halo game. Playground and Turn 10 become one unit, and Ninja Theory faces a proposed closure. Obsidian, by contrast, stays a named studio with named projects, and only its reporting line changes. Based only on what Xbox published, Obsidian’s move is structural. It does not change who makes Obsidian’s games.
The move follows franchises. Rare and World’s Edge sit with Activision. Forza and Fable sit with a merged Playground/Turn 10. Obsidian now reports to the Bethesda organization, where Bethesda Game Studios leads Fallout. Each move puts studios next to the franchises they work on. The new Fallout collaboration fits that pattern.
Obsidian’s history with Fallout. Obsidian made Fallout: New Vegas, and it later made The Outer Worlds and Grounded. A new Fallout project built with Bethesda Game Studios would bring the studio back to that series. Beyond the fact that the project exists, Xbox has shared nothing about its scope, genre, or timing.
Versus PlayStation 5, Switch 2, and PC. This story has no platform comparison yet. Xbox has not published a platform list for the new Fallout project, so any claim about PlayStation 5, Switch 2, or PC availability is guesswork.
The Reaction
Public reaction beyond news coverage is still forming. Outlet coverage has centered on the leaked memo: Polygon framed the move against fan worry after Halo changed hands, writing that “another merger has many fans worried,” while GamesRadar+ noted that “it’s not entirely clear what it means for the studio’s future.”
In our view, that worry is the question to watch. Obsidian is known for experimenting, and the open issue is whether it keeps room for original work if more of its effort shifts toward established franchises. Xbox’s own post names two projects, and one of them is a new game in someone else’s long-running series. The Polygon-reported memo says Obsidian keeps its creative identity. Whether that holds will show up in Obsidian’s next few announcements, not in this one. For now, the evidence supports “reassigned, not reduced,” and nothing stronger.
Our Take
Verdict: don’t buy anything because of this news. For the new Fallout project there is nothing to buy, so wait. For Obsidian’s existing games, check Game Pass first.
- The new Fallout project: wait. It has no name, date, platforms, price, or Game Pass confirmation. Skip any “pre-order” listing or rumor that claims otherwise. Xbox Wire is where the real details will appear.
- Grounded and Obsidian’s back catalog: check Game Pass before you pay. This announcement doesn’t change their availability. Before buying one of these games outright on your Xbox Series X|S, search for it in the Game Pass catalog on your console or in the Xbox app on Windows. Also check whether your Game Pass Essential, Premium, or Ultimate plan covers it.
- Is Obsidian closing? Nothing says so. Xbox says Obsidian will continue its current projects, and the reported memo says its leadership stays in place. The real losses here are the jobs: 268 confirmed in September, plus a July round whose Obsidian headcount Xbox has never confirmed.
What to do next: follow the official Xbox Wire news feed at news.xbox.com. That is where any Fallout reveal, release date, or Game Pass announcement will appear first. Don’t rely on reshared headlines.
Wrapping Up
Obsidian is still Obsidian. It has a new reporting line to Bethesda, Grounded continues, and it has a Fallout project in progress with Bethesda Game Studios. Our view is that this is one of the gentler moves in a rough week for Xbox studios. What remains unknown is the Fallout project’s title, platforms, release timing, and Game Pass status. The fair test comes when Obsidian announces its next original project.