Obsidian Entertainment, a subsidiary of Microsoft Corp.’s Xbox, has canceled multiple projects and will begin working on a new game in the popular Fallout franchise as part of the division’s broader restructuring, according to people familiar with the matter.

The video-game studio, based in Irvine, California, also laid off around a quarter of its workforce, said the people, who asked not to be identified because they were not authorized to speak to the press.

As part of the shake-up, Obsidian has canceled a planned sequel to the 2025 roleplaying game Avowed along with other unannounced projects.

Under the new plan, studio design director Josh Sawyer will lead a new title in the Fallout universe — a series of roleplaying games that take place in an alternate history in which the US has been ravaged by nuclear war. The emerging strategy is still in flux, the people said, and could still change.

Previously, Sawyer had been directing a roleplaying game that was similar structurally and thematically to Fallout but was not part of the franchise.

An Xbox spokesperson declined to comment.

[...] Obsidian released three games last year, two of which did not meet sales expectations, including Avowed, the company told Bloomberg Businessweek. The studio had been hoping to build on Avowed by developing a sequel in a shorter timeframe using the world and technology that it had already created.

Progress on the sequel was going well, and it was on track to be announced within the next year. But in the end, it did not fit into Sharma’s overall strategy, according to people familiar with the game’s development.

Some Obsidian employees will continue working on the Avowed sequel as they wait for new projects such as Fallout to be ready, perhaps in hope of one day reviving the game, the people said.

Obsidian will also continue to develop downloadable content for last year’s The Outer Worlds 2, the people said, and will also still work on its live-service multiplayer survival game, Grounded 2.?