One of Microsoft's biggest Xbox studios is forging a new path after development struggles, missing profit targets — "What are we learning?"

One of the most prolific game development studios under the wing of Microsoft's Xbox gaming division is Obsidian Entertainment, the storied team best known for creating beloved hits like Star Wars Knights of the Old Republic 2: The Sith Lords, Fallout: New Vegas, and Pillars of Eternity. More recently — last year, in particular — the developer released the Skyrim-inspired Avowed and a pair of sequels across Xbox, PC, and Xbox Game Pass, including the survival game Grounded 2 and the sci-fi RPG The Outer Worlds 2.

According to a new Bloomberg interview with CEO Feargus Urquhart and others at Obsidian, Grounded 2 was a major success, but both Avowed and The Outer Worlds 2 failed to meet Microsoft's lofty performance expectations. This, he said, has driven the studio to "think a lot about how much we put into the games, how much we spend on them, how long they take."

"They’re not disasters. I’m not going to say this was a kick in the teeth. It was more like: 'That sucks. What are we learning?'" he explained.

That, in turn, has led to Obsidian reevaluating its development processes, and ultimately striving to reinvent itself somewhat as it moves forward. One way it seeks to do this is to shorten the length of its development cycles to three-to-four years; both Avowed and The Outer Worlds 2 took over six years to make due to changes in scope and other challenges, straining the team's resources.

"I don’t think anybody really likes five, six, seven-year dev cycles. We’ve kind of grown into that," admitted The Outer Worlds 2 director Brandon Adler.

The developer is also aiming to avoid another "Year of Obsidian" like 2025, in which all three of the aforementioned games ended up releasing. Though it looks good from a marketing perspective, it spreads the team too thin. "Spacing those releases helps the company manage its resources and not burn everybody out," noted studio design director Josh Sawyer. "It’s not good to release three games in the same year. It’s the result of things going wrong."

Obsidian is shifting to take advantage of opportunities to outsource development as well, with the studio revealing that Grounded 2 wasn't conceived until Deus Ex and Tomb Raider developer Eidos-Montréal pitched the idea in early 2023 while approaching the team for contract work.

In one instance, Obsidian executives told their Montreal-based colleagues to scrap plans for multi-seat "buggies" — bugs that you can tame and mount in Grounded 2 — after the feature wasn't shaping up the way they wanted. Final decisions like that are faster and easier to make from afar, realized game director Chris Parker, than they are in-house.

"I was like, 'If this was one of our internal teams, we would work on this for another two or three months,'" he said. "We made this call because we could tell them what to do. It feels like we still run around with our kid gloves on internally."

Finally, the studio is looking to reuse technology from its previous projects as much as it can as it moves on to new ones, much like how it utilized Fallout 3's Gamebryo engine and many of its systems and assets to speed up the production of New Vegas. "We don’t need to change everything every time," Urquhart explained. "We’ve had this debate internally: Do people really care that we spent an extra hundred person-months on the inventory screen?"

As Obsidian moves forward, it aims to adopt all of these strategies to streamline and improve its game development. Notably, it doesn't have plans for a third entry in The Outer Worlds franchise, though more titles set in the Pillars of Eternity and Avowed universe are on the horizon.

"Our job, all of us here, is to go make games that people want to play and buy, and if we continue to do that, then we have a solid business," concluded Urquhart.

Are you a big fan of Obsidian's games? What did you think of the three it released last year? Do you think the studio's reworked development processes will lead to better RPGs? Hit me with your take in the comments.

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