We’re tracking conflicting reports that Obsidian Entertainment may be negotiating with Microsoft to avoid closure — and that those claims were quickly disputed. Take this with a pinch of salt: the facts on the ground are messy, the sources disagree, and the situation is still unfolding.
What Was Reported
Per Eurogamer, a new piece relays a short report from The Game Business suggesting that Obsidian Entertainment is “another studio currently negotiating with Microsoft to avoid closure” as part of the company’s reassessment of its business.
The Game Business, as described in Eurogamer's coverage, includes commentary from Christopher Dring that there is “a real sense amongst some teams that they're being punished for the poor performance of Call of Duty.” The report further relays the claim that the performance of Avowed and The Outer Worlds 2 could have “performed five times the numbers that they did” and still “wouldn't have offset the drop on Call of Duty.”
Eurogamer also relays that other studios have been named across various reports: Arkane was reportedly one of five studios Microsoft is targeting to close, and previous speculation has highlighted Double Fine, Compulsion Games, Ninja Theory and Undead Labs as studios potentially impacted by Xbox’s wave of layoffs.
The Game Business included a development expert quote relaying scepticism that simply reallocating budgets to a major franchise would magically produce a critical hit: “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,” the source is quoted as saying.
The Source & Credibility
Shortly after The Game Business report reached the public eye, Bloomberg’s Jason Schreier pushed back on social media. Schreier said he could “confirm that Obsidian is *not* in negotiations to avoid shutting down,” adding that “Xbox is keeping Obsidian, according to people familiar with the situation.” He also warned that “plenty of details are still up in the air surrounding the layoffs (picture will be clear on Monday).”
At the time of writing, neither Xbox nor Obsidian has commented on potential impacts to the developer, per Eurogamer.
These are conflicting signals from two industry outlets. It’s possible — as Eurogamer notes — that both reports could be “true” in a sense: Microsoft’s internal decision-making appears to be chaotic, and different insiders may have been speaking at different times to different people. That means one source might have been right at one moment, another right at a later one.
What It Could Mean
If true, the idea of Obsidian entering negotiation to avoid closure would be a major escalation in Microsoft’s reported reassessment of the Xbox division. The broader context presented by the reporting is that new CEO Ash Sharma is pursuing a “reset” of Xbox’s business, and that this reset could include wide-ranging layoffs and cuts.
- Significant Job Losses: Industry voices cited in Eurogamer suggest that at least 1,000 jobs could be lost as part of the reset.
- Studio Offloading Or Closure: The Game Business framing implies that studios like Undead Labs, Double Fine, and Ninja Theory are already in the frame for potential offloading or shuttering.
- Budgets Reallocated: Sources argue there’s a temptation inside Microsoft to shift resources to huge franchises like Halo, though another insider calls that approach “delusional.”
All of that is speculative and conditional. We’re reporting what various sources claim; none of these outcomes are final or fully confirmed. If Schreier’s account is correct, some of the worst-case specifics about Obsidian could be wrong. If The Game Business is correct, Microsoft’s internal uncertainty may still be producing last-ditch negotiations at multiple studios.
Why This Matters
This matters because the decisions being discussed could reshape Xbox’s studio ecosystem and the future of games from those teams. Whether you care about Avowed, The Outer Worlds 2, or the health of mid-sized studios more broadly, the reported reset under Ash Sharma is being framed as a high-stakes business pivot.
Take these reports with a pinch of salt. According to Jason Schreier, clarity “will be clear on Monday,” but until official confirmation comes from Microsoft or the studios involved, we’re left with competing claims and a lot of uncertainty. We’ll keep digging and will report any verified updates as they arrive.
