As part of a wider Xbox reset announced Sept. 22, 2026, Microsoft is reshuffling studio reporting lines and cutting roles. Obsidian will now report to Bethesda while continuing its current projects, including a new Fallout collaboration.
Obsidian will move under Bethesda and will keep working on existing projects, including Grounded and a new Fallout collaboration with Bethesda Game Studios.
Xbox announced 268 eliminated roles across Halo Studios, other first-party teams, and central XGS functions as part of the same restructuring.
Several studio divestitures and transitions were confirmed: Compulsion and Double Fine returned to management, Undead Labs transitioned to a new publisher, while deals for Ninja Theory fell through and Arkane remains under consultation.
# What happened
On September 22, 2026, Xbox leadership sent a global message outlining the next phase of a previously announced reset. The announcement combines staff reductions with a reorganization of first-party studios. One of the headline changes is that Obsidian Entertainment will now be part of Bethesda.
The memo states the restructure aims to operate fewer business units, align groups that already work closely together, and concentrate publishing expertise.
# The concrete moves
# Layoffs and numbers
The announcement confirmed 268 eliminated roles across Halo Studios, other first-party teams, and the XGS management and central functions layer. The message framed these actions as completing roughly three-quarters of the previously announced restructuring that began earlier in the year.
# Studio divestitures and transitions
# Leadership messaging and next steps
The memo stressed support for affected employees and said leadership will spend time with studios over the following week. An all-Xbox town hall is scheduled for October 6 to review progress and discuss the upcoming lineup.
Matt Booty's memo framed the restructure as a consolidation of publishing and development responsibilities to strengthen franchises and streamline operations. The message references prior studio divestitures that were part of the same reset.
# What this means for Obsidian and its projects
Obsidian will report to Bethesda's leadership and remain on its current slate of work. The announcement explicitly mentions Grounded and a new Fallout project that Obsidian is developing with Bethesda Game Studios. No changes to those active projects were detailed beyond the reporting-line shift.
# Immediate implications for Xbox's first-party strategy
The company is also pursuing divestitures and publisher transitions for other studios rather than keeping every studio in-house.
# Timeline and public events
The reorganization announcement arrived Sept. 22, 2026. Leadership set an October 6 all-Xbox town hall to discuss progress and the roadmap for the upcoming game lineup.
As Xbox continues its reset and lays off nearly 300 staff , the company announced that some of its subsidiaries have been shaken up as well. This includes Obsidian Entertainment, which will now operate under Bethesda Softworks. On September 22, Xbox chief content officer and executive vice president Matt Booty posted o
The RPG powerhouse has been rehoused
Obsidian will remain a "distinct" Obsidian with their own "creative identity and strengths", despite no longer operating independently of fellow Xbox-owned RPG makers Bethesda. That's according to Jill Braff, president of Bethesda and Microsoft's casual games division, in a memo sent to staff at the former following th
Microsoft has offered an update on its Xbox layoffs, which sources indicate will fall below the previous numbers revealed in July.
Bethesda's president has spoken about how Obsidian will fit within Bethesda
The 'creative identity and strengths that make Obsidian distinct will remain at the core of their studio'
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