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

A new report from The Game Business suggests that Obsidian Entertainment is another studio currently negotiating with Microsoft to avoid closure as part of the company’s controversial reassessment of its business. Only yesterday, we heard that Dishonored developer Arkane is reportedly one of five studios Microsoft is targeting to close down as part of its big ‘reset’. This follows on from previous comments highlighting Double Fine, Compulsion Games and Ninja Theory as other potential victims of Microsoft and Xbox’s latest wave of sweeping layoffs. Undead Labs is also affected by the move.

The report at The Game Business is fairly short when it comes to Obsidian, specifically, but Christopher Dring noted in the article that there’s “a real sense amongst some teams that they’re being punished for the poor performance of Call of Duty”. This is followed by the assertion that the performance of Avowed and The Outer Worlds 2 could “performed five times the numbers that they did” and still “wouldn’t have offset the drop on Call of Duty.” Dring notes that a game of that scale – alongside Candy Crush, Minecraft, and Warcraft – make a lot of Xbox’s output “seem almost insignificant”.

That’s why some staff internally at Microsoft think getting the offloading or shuttering of studios like Undead Labs, Double Fine or Ninja Theroy is futile. “If they think they can take that budget, stick it on Halo, and suddenly turn it into a 95 Metacritic smash hit, they’re delusional,” a development expert who spoke to The Game Business noted.

However, shortly after the publication of today’s The Game Business report, Bloomberg’s Jason Schreier took to BlueSky to pour water on the rumours. “Despite a report this morning, I can confirm that Obsidian is *not* in negotiations to avoid shutting down,” he said in a post. “Plenty of details are still up in the air surrounding the layoffs (picture will be clear on Monday) but Xbox is keeping Obsidian, according to people familiar with the situation.”

Xbox or Obsidian has not commented on any potential impacts it could have on the developer at the time of writing.

It is worth mentioning that, essentially, both reports could be true: there is a lot of internal chaos at Microsoft right now, and it is very likely that depending on the when various sources spoke to who, everything could have been correct at the time of writing. It stands to reason that Microsoft could be very back-and-forth about its decisions in the run-up to whatever its ‘big reset’ looks like in its final shape.

The reportedly wide-ranging layoffs and cuts covered here are all part of new CEO Ash Sharma’s “reset” plan, which is set to affect the entire Xbox division as she attempts to turn it into a healthy business. The implications of this shift aren’t final yet, but some industry veterans are suggesting that at least 1,000 jobs could be lost as a result. We have already seen the exodus of a wide range of staff and veteran developers, and we expect things will only get messier from here on out.