How Obsidian became Xbox's most prolific studio: "There's not a lot of studios at Microsoft that have an entire external developer making the whole game for them"

2025 is the year of Obsidian Entertainment. Formed 22 years ago, the legendary RPG maker responsible for Pillars of Eternity, Fallout: New Vegas, Alpha Protocol and countless other video games is on something of a hot streak.

Microsoft Gaming purchased Obsidian in 2018, folding the team into the Xbox Game Studios group. Since then it has wrapped production of The Outer Worlds; released Grounded, supporting it through years of early access and regular content drops; released Pentiment in 2022, and Avowed in 2025 following a short delay; and managed to bring Grounded and Pentiment to PS4, PS5, and Nintendo Switch as part of Microsoft's multiplatform initiative. If that weren't enough, it also has The Outer Worlds 2 and Grounded 2 set to release this year.

It's a lot, particularly for a first-party studio operating within the Xbox ecosystem. I was keen to understand how the studio has managed this flood of new releases, and thankfully the teams at Obsidian Entertainment were only too happy to answer.

Inside Grounded 2

When Xbox revealed Grounded 2 at the Xbox Showcase, it announced that "Obsidian and Eidos Montréal have joined forces to bring you the next chapter with even more depth, danger, and discovery to experience." The way development responsibilities have been split between the two award-winning teams says a lot about the flexibility Obsidian has been afforded by Xbox Game Studios.

"Grounded 2 is actually a good example of our growth as a developer. We could not do what we're doing right now if we didn't have great development partners and co-dev partners," says Feargus Urquhart, studio head and CEO at Obsidian. "That's one of the big transitions for us"

Urquhart says that it has long been his ambition for Obsidian to scale beyond the boundaries of a traditional studio, simply shifting from one project to the next. "With Pillars of Eternity 2, we signed up a publisher late because we really wanted to start publishing games ourselves. We didn't really have the people internally, so we hired some people in but it didn't really work out. So unlike CD Projekt RED, BioWare, and others who were on the cusp of becoming publishers we weren't getting there."

"This isn't me saying that Microsoft is allowing us to become a publisher," he laughs. "It's more that the acquisition has allowed us to become a more multi-faceted developer, which is what I've always wanted to do." This is a key component behind how Obsidian has been able to scale so quickly, and maintain such a rapid-fire release schedule. Urquhart adds: "It's allowed us to sign up external teams. There's not a lot of studios at Microsoft that have an entire external developer making the whole game for them."

Grounded 2 has been in development for just under two years, meaning it entered production around a year after the release of Grounded 1.0 and a year before the survival-adventure made its way to PS5, PS4, and Nintendo Switch. Around this same time, Obsidian was juggling development of Avowed and The Outer Worlds 2. Grounded attracted over 25 million players into the backyard, it's popular and there were demands for more; but how could Obsidian have possibly squeezed in a sequel?

"The Grounded team was relatively small, it maxed out in the 20s," says Chris Parker, Obsidian co-founder and Grounded 2 game director. "When we started thinking about doing Grounded 2 it was fortuitous how it worked out, actually, because we wound up talking to Eidos about some other stuff and it turned out that they had a small team who absolutely loved Grounded. They were almost pitching us on the sequel."

From there a "significant team up at Eidos" and a "relatively large group at Obsidian" came together to push Grounded 2 through production. Grounded 1's game director Adam Brennecke, its lead programmer Roby Atadero, art director Kazunori Aruga, along with six other principal leads and a small internal steering group at Obsidian joined Parker to collaborate closely with Eidos. "We are constantly at each other's offices. We're talking about stuff daily. It's a really healthy relationship. And because they actually love the game at Eidos, it's not like this dispassionate contractor that we've hired. They are bringing all their own stuff to the table," says Parker.

Grounded 2 producer Miles Winzeler adds: "Obsidian and Eidos have similar design goals as studios. We mesh really well together. It's also the difference between the two of them that's been a big strength. It means Grounded 2 will feel like its own piece, as they are able to flex what they're best at, too."

Enduring Relationships

Urquhart uses Voltron as his point of reference to describe how external teams join together with Obsidian to create something bigger, more powerful. He tells me that before the 2018 acquisition into the Xbox Game Studios group, Obsidian largely handled work in-house outside of VO, QA, and localization departments. But support from Xbox has allowed the studio to expand here in all areas of design, and reconnect with friends and former developers from across the years.

Obsidian is collaborating with Aspiring Unicorn, UI and UX experts working across The Outer Worlds 2. There's a relationship with Digimancy Entertainment, founded by Obsidian veteran George Ziets, and with Beamdog – co-founded by Trent Oster of BioWare, who Urquhart first encountered while working on Shattered Steel at Interplay two decades ago. Urquhart is quick to shout about these relationships (and plenty more of them). Both as an example of the ensuring legacy of Obsidian and how the studio is able to grow the scope of its projects without growing the studio too quickly.

Still, I wonder whether an increasing reliance on co-dev and outsourcing risks diminishing the identity of an Obsidian game. Urquhart says it's better to think of it as augmenting. With the right people in place, scaling this way is only to the benefit of the games coming out of the studio. "The person in charge of the day-to-day collaboration with Eidos Montreal is Chris Parker, right. He was the producer on Baldur's Gate 2 and he has this length of experience working with external developers. It comes back to this question of, 'What are our strengths?' 'Do we have the people who do these things?'"

"The idea is not to be doing way more than what we're doing right now, but I think we've hit a really good size and a really good amount of things we can do. I can still be involved in all of it too, and not lose my mind – at least no more than I already have," he laughs. "You know, Obsidian was founded by three producers, a designer, and a programmer. The intent was always to do this with our projects. Back then it was a little bit more for survival, now it's because I think it makes us better game makers."

The Heart of Obsidian

Working with external development partners is one piece of the puzzle, but not the entire picture. One way Obsidian is able to unleash Avowed, Grounded 2, and The Outer Worlds 2 within a single year is partly because of its ethos as a group: "Perfect is the enemy of the good," says Urquhart. "Our job is to make amazing games, not perfect games."

In a world where six-to-eight years is threatening to become the standard timeframe for AAA, first-party game development, seeing Obsidian become so prolific has been great to watch from a distance. Taken at an individual level, the studio is delivering exceptionally fun titles that share a consistent quality – they aren't necessarily changing the video game industry in a fundamental way, but then I suspect that they aren't supposed to.

"There was a big push for a long time of everything needing to be bigger, better, and perfect, and 'ahhhh'," screams Urquhart, before chuckling: "hey, you know what 'ahhhh' means." What he's saying here is that this need for first-party studios to be operating on a level above the rest of the industry "can lead to trying to move on too many fronts at once." He adds: "That's the biggest thing for us, identifying what we are good at, what we can do with the time that we have, and then just focus on the content that we're creating – because that's what the player actually plays!"

The sentiment that "our job is to make amazing games, not perfect games" feels like a healthy outlook to have. The industry is in a bit of a difficult position right now. The cost of video game development is spiralling, with some of that cost starting to come back on the consumer – The Outer Worlds 2 will be Xbox's first game priced at $80. The playerbase is increasing, albeit focused on a smaller selection of titles thanks in no small part to the live-service explosion in 2017. And it seems like we're barely able to go a month without some prominent, legendary development studio suffering layoffs (something the Xbox Game Studios group hasn't been immune to either). Is there not a pressure to deliver "perfect" in this environment?

"Nobody at Xbox is putting that pressure on us," says Marcus Morgan, executive producer of Grounded 2. "But it's there in the back of our minds, right? It's something we think about, and something we talked a lot about early on. There were even some moments of like, teenage years, growing through becoming a first-party studio where we wrestled with that pressure."

"In one of the first meetings that we had with [Matt Booty, president of game content and studios] and the rest of Xbox after the acquisition, they asked us to continue being true to who we are and they have given us the space to do that. We've made sure to never lose the muscle memory of having multiple teams, and of having the teams build off of each other. We haven't lost that rhythm post-acquisition," adds Justin Britch, executive producer of The Outer Worlds 2.

"Every studio has its own role to play in the industry, and its own role to play within the organization that it's in… We want to make games that we're really proud of and get them out into the world. That's our role, and we've been really fortunate to be able to do that within the Xbox ecosystem."

Building On The Past

Both Morgan and Britch point to Obsidian operating with multiple teams shifting between projects as a point of pride. "We've always been a multi-project studio," says Morgan. "We always have multiple teams working on multiple games, which is somewhat unique – especially in the first-party ecosystem."

This way of operating, Britch tells me, intersects directly with another focus for Obsidian: "We have a principal at the studio about building on past success. Some of the studios who I really admire have this iterative approach and keep building on a formula. We try to do the same. We try to keep pushing things forward while recognizing what really worked well; we don't need to reinvent the things that really matter."

"That's a component of how we're able to ship multiple games and keep shipping them, because we're so focused on building on our past successes, making them better while making sure that we aren't throwing everything out and starting over every time, because that can make it take a really long time to bring out new games," he adds.

"Another major thing is that you learn when you ship," says Urquhart, speaking to Obsidian's dedication to shorter development cycles. "Not only do you learn because you actually finish a project, but you learn because your game goes out there and people tell you what they really think of it. The longer you go between those cycles, the less you're learning."

At this point Urquhart points to Baldur's Gate 3 as an example, something that happens countless times during our conversation – clearly the Larian RPG is on the veteran RPG maker's mind. "The only reason Baldur's Gate 3 can exist is because Divinity Original Sin 2 existed. If Larian took 10 years to develop Original Sin and then 10 years to develop Original Sin 2, then there's no Baldur's gate 3. That's what's super important to me. The idea is that when we ship, we learn; the pursuit of perfection leads to not shipping."

A phrase that Urquhart likes to wheel out is "constraints breed creativity." What's interesting here is that, for Obsidian, the constraints seem self-imposed. There's a strong impulse to continue iterating on its foundations, rather than rip them up to try and build something more audacious. A desire to work with external developers and partners rather than grow too quickly, a mind-share of expertise internally and across the industry. And it's in the combination of all of these things which has allowed Obsidian to become the most prolific studio within the Xbox Game Studios group.

"Remember, even the work that's done outside of Obsidian comes back inside the building, and that builds on what we're doing" says Urquhart. "There's technology from Grounded that's in Avowed, technology from Avowed that's in Grounded 2, and so on. I'm super thankful that Microsoft has allowed us to build out this group of developers and support networks, and that it just lets us be… Obsidian. We're just becoming what we've always wanted to become, which is this more well-rounded group who is able to take on a lot more of the stuff that we've always wanted to do."

The upcoming Xbox Series X games lineup includes Grounded 2, which launches into Game Preview, Game Pass, and Steam Early Access on July 29, 2025. It is followed by upcoming Obsidian game The Outer Worlds 2 on October 29, 2025 where it will release for PC, PS5, Xbox Series X, and Game Pass. Avowed launched on PC and Xbox Series X on February 13, 2025.

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