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Inside Xbox, Obsidian Is Trying to Reinvent Itself

IbizaPocholo

IbizaPocholo

NeoGAFs Kent Brockman

Obsidian Entertainment is pivoting to faster development cycles of 3-4 years per game by reusing technology, outsourcing, spacing releases, and balancing big and small projects to meet Microsoft's profitability pressures amid a challenging industry landscape.

Summary

  • Obsidian Entertainment, a Microsoft-owned Xbox studio in Irvine, California, released three games in 2025—Avowed (trippy fantasy RPG), Grounded 2 (survival game), and The Outer Worlds 2 (dystopian sci-fi RPG)—marking a prolific "Year of Obsidian," but Avowed and The Outer Worlds 2 failed to meet Microsoft's sales forecasts despite Grounded 2 being a hit.
  • CEO Feargus Urquhart holds weekly breakfast meetings with his management team to discuss the studio's future, reflecting on underperforming games as learning opportunities rather than disasters, amid a shaky games market and turmoil in Microsoft's Xbox division pushing for higher profit margins.
  • Development timelines for Avowed and The Outer Worlds 2 exceeded six years each, inflating costs; Urquhart aims to reduce this to three or four years per title by reusing technology across projects, avoiding rebuilding systems like animation or inventory screens every time, and embracing outsourcing.
  • Grounded 2 was developed more efficiently by outsourcing to Eidos Montreal, with Obsidian senior staff like co-founder Chris Parker overseeing remotely, enabling quicker pivots such as cutting shared multiplayer "buggies" functionality to save months of development.
  • The studio, with about 280 employees, was stretched thin supporting three simultaneous releases, leading to burnout; future plans include spacing releases to better manage resources, as noted by design director Josh Sawyer.
  • Obsidian's history includes founding in 2003 after Interplay's near-bankruptcy, surviving on contracts for Star Wars, Fallout, and South Park games, near-collapse in 2012 after Microsoft's Stormlands cancellation (salvaged via Kickstarter), and acquisition by Microsoft in 2018.
  • Avowed originated as an ambitious Skyrim-Destiny hybrid pitch during acquisition talks but lost multiplayer after two years and changed directors, extending development to nearly seven years.
  • The Outer Worlds (2019) was a surprise hit selling 5 million copies; its sequel faced pandemic delays and tech challenges, with director Brandon Adler noting dislike for long dev cycles of five to seven years.
  • Industry context: Game development costs have risen from seven figures in the 1990s to nine figures today, leading to widespread layoffs (tens of thousands since 2023, including at Xbox), studio closures, and project cancellations; Xbox faces flat revenue growth, declining console sales, and shift to AI priorities post-$69 billion Activision Blizzard acquisition.
  • Microsoft's Xbox imposes a 30% profit-margin target on studios; Obsidian benefits from Game Pass subscriptions, critical acclaim, and long-tail RPG sales that boost hardware, as stated by Xbox GM Mary McGuane.
  • Strategies for sustainability: Juggle multiple projects (big and small, new games plus DLC for Outer Worlds 2 and Grounded 2), retain staff, avoid headcount bloat, pursue moderate successes over trends; no third Outer Worlds planned but continuing Avowed universe.
  • Leadership transition: Urquhart grooming lieutenants Justin Britch (33) and Marcus Morgan (36), who presented "Obsidian's 100-Year Plan" at D.I.C.E. Summit emphasizing consistent output for breakout hits.
  • Lessons from 2025 releases: Consider adding features like player crimes/arrests in Avowed or stronger companions in Outer Worlds 2 for engagement; Urquhart emphasizes making games people want to play and buy.
  • Past efficiency example: Fallout: New Vegas (2010) cost $8 million and took under two years by reusing Fallout 3 tech.
  • Pentiment (2022) was a low-cost, critically acclaimed niche success, showing value in smaller projects; Xbox praised for funding creative range.
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Punished Miku said:
Most underrated studio this gen. Great games released fast with small staff size in multiple genres.
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Agreed. Liked Avowed, liked TOW2, liked Pentiment. Grounded ain't my thing, but that's fine. Still looks like a good game. And their output in the years preceding purchase was also pretty darn good with Pillars and Tyranny and the first TOW, plus doing Stick of Truth with Ubi.
 
Please make your games more gritty and dark fantasy again. Stuff like Pentiment is great, but for the big hitters like Outer Worlds and Avowed the tone has just been off for me, has failed to draw me in like PoE and New Vegas
 
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A day after one of these breakfast gatherings, Urquhart is sitting with a Bloomberg Businessweek reporter in a conference room in Obsidian's offices in Irvine, California, a pleasant but humdrum Orange County suburb. After more than two decades as chief executive officer of the studio, Urquhart, 55, speaks with a level of candor that's unusual among the industry's leaders, who'd rather talk only of successes. The company is trying to navigate a shaky games market as well as turmoil in its corner of Microsoft, whose Xbox game division has been buckling under pressure from its ambitious profitability goals.
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Obsidian's plan for the next few years is to work on projects big and small—completely new games and added content for The Outer Worlds 2 and Grounded 2—and space out their releases. It isn't working on a third Outer Worlds game but does plan to keep making games in the Avowed universe. Although the studio remains proud of what it accomplished in 2025, it's safe to say Urquhart and his team hope to never repeat the Year of Obsidian.


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Source
 
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The problem I see with this studio is the writing. In Avowed the writing was quite mediocre. In OW2 it's better but still, they used to be better in this regard

It doesn't help either that there is wokism inside their studio which might explains the drop in quality in terms of writing

Obsidian is a studio that has thr potential to do awesome games but in the end they always end up making just decent or good quality games without greatness.

I hope they do better in the future. OW2 was a step in the right direction but still, it wasn't enough imo
 
These games would do far better if they released at 40-50$. That way they could have had a lot of gamer goodwill, just like E33. I have no idea why games like Avowed and TOW2 released at 70$. They have reduced the price for the ps5 release, but I am afraid it might be too little too late.
 
Punished Miku said:
Most underrated studio this gen. Great games released fast with small staff size in multiple genres. This is how you run a studio.
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All of their games are good not great. Which is why games like Avowed and The Outer World's 2 struggled sales wise. Developing games fast is the issue. Their games are 75% of an amazing game. So much potential if given the proper resources. 70$ does their games a disservice too
 
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Obsidian's entire history is basically failures of meeting sales expectations. Even with Star wars franchise slapped on it. Their biggest success being Fallout NV but Bethesda basically got most of the rewards while they got fucked by reviews.
 
I can count on one hand the number of studios that have competent writing. The outliers are not the norm. Same with graphics. If Ferrari have top cars, doesnt mean Toyota is trash.
 
Avowed was extremely mediocre. It had some good parts but I grew tired of it when I reached the second half of the game. It doesnt help either the constant politic agenda pushing strong women making men look weak. The whole game is plagued with this issue

As for OW2, its a much better game even though the last third was a bit disappointing because of the constant backtracking to complete missions. You can tell the developers in the game grew tired because its much less inspired. That being said I think OW2 was a good game so it's sad that the sales are not what they expected. At the same time, I think that the game was too expensive at launch and being in Gamepass day 1 didn't help I guess.

Anyway maybe its time for Obsidian to start taking more time to develop games and improve their writing in general
 
Obvious based on Steam numbers. I mean, Bloodlines 2 was a total flop that Paradox lost almost 30 million USD on and it still posted better numbers.
I finished Avowed and it is very much the definition of "not great, not terrible" 7/10 game with lame writing, decent exploration and combat. It has extremely basic mechanics and non-reactive world and does not inspire much reverence.
Outer Worlds 1 was similar, OW2 I have yet to play.
Days of New Vegas and KOTOR 2 and Alpha Protocol seem to be long gone. I hope I am wrong though.

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MS needs to force them to make New Vegas 2 if they care about getting a return on their investment. It will probably still be bad, but at least they can make a lot of money from the brand name.
 
I enjoyed The Outer Worlds 2 quite a bit.
But I also couldn't help but think that the specific genre is a relic of bygone age, and that the next generation of such games will utilize AI to make the story much more dynamic and adaptable.
 
StreetsofBeige said:
Compare the games they made earlier in their history to all the recent junky stuff. Like night and day.

Very similar vibe to Bioware changing like they're twins.

Obsidian Entertainment - Wikipedia

en.wikipedia.org en.wikipedia.org
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They nailed it with their first South Park game.

adamsapple said:
Am I missing something or do neither of the paragraphs in the OP actually talk about sales and/or expectations at all?

Are we getting Draugoth Draugoth 'd again?
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It's in the article
Last year the developer released three games—a rare and impressive achievement for a studio of its size—but two of them failed to meet sales forecasts set by Obsidian's parent company, Microsoft Corp. "They're not disasters," Urquhart says. "I'm not going to say this was a kick in the teeth. It was more like: 'That sucks. What are we learning?'"
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adamsapple said:
Am I missing something or do neither of the paragraphs in the OP actually talk about sales and/or expectations at all?

Are we getting Draugoth Draugoth 'd again?
Click to expand...
Last year the developer released three games—a rare and impressive achievement for a studio of its size—but two of them failed to meet sales forecasts set by Obsidian's parent company, Microsoft Corp. "They're not disasters," Urquhart says. "I'm not going to say this was a kick in the teeth. It was more like: 'That sucks. What are we learning?'

While Grounded 2 was a big hit, the disappointing results from the other two have led Obsidian to "think a lot about how much we put into the games, how much we spend on them, how long they take," Urquhart says
 
Avowed's art design was just way too out there with the color palette and all the wierdness going on, obsidians demographic was always the classic rpg/dnd community and for that clientele it was just too plain wierd, also no one is gonna pay 70-80 for a obsidian jankfest, lets face it their games are always buggy on release.
 
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Punished Miku said:
Most underrated studio this gen. Great games released fast with small staff size in multiple genres. This is how you run a studio.
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Charlie Murphy Laugh GIF


Once great studio degenerated into making GamePass slop - yes, truly "underrated studio". Hey, Obsidian, want to make money again? Look at New Vegas and Tyranny, or Pillars of Eternity, there are some hints there what you can do. HINT: Paperthin edgy characters is not that.
 
I genuinely enjoyed The Outer Worlds 2

It's honestly sad to see it underperform commercially, because it deserves way more recognition and players
 
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DenchDeckard said:
Outer worlds 2 is awesome. Grounded is sick. Pentiment was dope. GG obsidian. Keep it up.

Good studio.
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Outer Worlds was mid, I don't remember a single thing from that game. I still remember the beginning of PoE 10 years later.

Grounded - cute, where's the RPG part?

It's an RPG studio, they make best games where they are able to focus on the quality of writing.
 
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