Obsidian Entertainment, Inc. is an American video game developer based in Irvine, California and part of ZeniMax Media. It was founded in June 2003, shortly before the closure of Black Isle Studios, by ex-Black Isle employees Feargus Urquhart, Chris Avellone, Chris Parker, Darren Monahan, and Chris Jones.
Although it has created original intellectual property, many of its games are sequels based on licensed properties. Early projects included Star Wars: Knights of the Old Republic II: The Sith Lords and Neverwinter Nights 2, both sequels to BioWare-developed games. The team then developed its first original game, Alpha Protocol, in 2010. Other notable works from Obsidian include Fallout: New Vegas, Dungeon Siege III, and South Park: The Stick of Truth, all of which are also licensed properties.
Throughout the studio's history, many projects—including Futureblight, Dwarfs, Aliens: Crucible, and Stormlands—were canceled. Due to having so many projects canceled, the company entered a severe financial crisis in 2012. As a result, Obsidian decided to crowdfund its next game, Pillars of Eternity, a role-playing game played from an isometric perspective, which ultimately became a success and saved the studio from closure. The team's focus then changed from developing licensed titles to creating original games based on the studio's own intellectual property, including a sequel to Pillars of Eternity and The Outer Worlds.
In November 2018, Obsidian Entertainment was acquired by Microsoft and became part of Microsoft Studios (now known as Xbox Game Studios). Under Microsoft, the company continued to work on triple-A role-playing games Avowed and The Outer Worlds 2, and started developing games that are smaller in scope, such as Pentiment, Grounded, and its sequel. In September 2026, Obsidian was moved under the purview of ZeniMax.
History
2003: Founding Obsidian Entertainment was founded by Feargus Urquhart, Chris Avellone, Chris Parker, Darren Monahan and Chris Jones on June 12, 2003. Prior to the establishment of Obsidian, they worked for Interplay Entertainment's subsidiary Black Isle Studios. At Black Isle they created several role-playing games including Icewind Dale, Planescape: Torment, and Fallout 2, and collaborated with BioWare on Neverwinter Nights, Baldur's Gate, and Baldur's Gate II. Most of these games were critically and commercially successful, but Interplay's financial situation was poor and the studio lost its license to produce Dungeons & Dragons-based games. This led to the cancellation of Baldur's Gate III: The Black Hound. Urquhart and most of the staff members were dissatisfied and frustrated with the cancellation, as the game had already been under development for a year and a half. Urquhart became convinced that staying at Black Isle was no longer a "viable option" for the team, and decided to leave the company. He was in his early thirties at the time, and thought that if he did not start a new company soon, he might become too old to do so. Urquhart officially left Interplay in 2003 with Avellone, Parker, Monahan, and Jones, and founded Obsidian Entertainment with them the same year.
At the time of the company's establishment there were seven employees, including the company's five founders. Parker, Urquhart, and Monahan invested $100,000 to $125,000 into their newly founded company. When choosing the name of the company, they had prepared a short list of names for them to choose. The list included "Scorched Earth" and "Three Clown Software". The team eventually chose "Obsidian Entertainment", which they thought was strong, memorable, and felt similar to name of their old studio, Black Isle.
Upon its establishment, the studio needed more capital in order to keep its operation running, and thus needed to gain support from publishers. They approached Electronic Arts, but it did not result in a project. The studio also contacted Ubisoft looking to make a Might & Magic game, but Ubisoft instead ended up contracting with Arkane Studios on that project, which became Dark Messiah of Might & Magic. Obsidian pitched a game to Take-Two Interactive called Futureblight, which was described as a Fallout-style game powered by the Neverwinter Nights engine. Similar to the EA and Ubisoft projects, Futureblight was never made.
Late 2003–2008: Sequels to BioWare games Towards the end of 2003, the team was contacted by LucasArts president Simon Jeffrey, who requested that Obsidian make an action role-playing game set in the Star Wars universe. The team suggested a game concept which featured first-person lightsaber melee combat and that included established characters like R2-D2. Their idea was rejected, and Jeffrey instead asked Obsidian to create a follow-up to the BioWare-developed Star Wars: Knights of the Old Republic, as the team at Obsidian was familiar with the technology that the original game used. The partnership between the two companies finalized in late 2003, and development of the game, which became Star Wars Knights of the Old Republic II: The Sith Lords, began in October 2003. Obsidian was given 15 months to develop The Sith Lords. Originally set for a holiday 2004 release, LucasArts gave the studio an extension into 2005, before shifting the release date back to holiday 2004 following the Electronic Entertainment Expo. While LucasArts did dispatch members of its own staff to help get the game out on time, a number of features wound up being cut due to time constraints. Due to the moved deadline, Obsidian also did not have enough time to polish the game, and The Sith Lords suffered from crashes and other technical issues. Despite its issues, The Sith Lords was released to positive critical reception. The cut features were eventually restored by modders, who began their effort in 2009 and finished in 2012.
From the beginning, the studio's goal was to be able to develop multiple projects simultaneously, and the decision led the company to expand very quickly. Soon after the development of The Sith Lords began, the team expanded to 20 employees. As of July 2004, it had expanded to 27, with 18 from Black Isle, and others from Blizzard Entertainment, Electronic Arts, Taldren, Totally Games, Treyarch, and Troika.
Prior to the launch of The Sith Lords, Obsidian was approached by Atari. Atari acquired the license to produce Dungeons & Dragons-based games, and wanted Obsidian to create a sequel to Neverwinter Nights, which became Neverwinter Nights 2. Development of the game began in July 2005 with a team of ten people. The development of the game was headed by Monahan and Avellone. Obsidian became the game's lead developer, while Neverwinter Nights creator BioWare provided technical assistance. While it was developing the game, the team's size grew to about 50 people. The team were given sufficient time for the game's development, and Atari was willing to delay the project's targeted release window from Christmas 2005 to October 31, 2006. Neverwinter Nights 2 received a generally positive critical reception. Two expansions, Mask of the Betrayer and Storm of Zehir, were released in 2007 and 2008.
During Neverwinter Nights 2s development, the team approached other publishers to work on additional projects. Disney Interactive Studios commissioned Obsidian to develop a prequel to Snow White and the Seven Dwarves called Dwarfs, which was set to be a third-person action game for the PlayStation 3 and Xbox 360. Work began in 2005, and the team developed a prototype and was a year into development when Bob Iger replaced Michael Eisner as CEO of The Walt Disney Company. As CEO, Iger led Disney to head in a completely different direction, which made the Snow White franchise "untouchable" and resulted in the cancellation of the project. According to Urquhart, the team loved the game and its cancellation was a "heartbreaking" experience for them.
2009–2014: Alpha Protocol and licensed properties With the development of Neverwinter Nights 2 coming to an end, Obsidian was contacted by three different publishers. Electronic Arts wanted Obsidian to develop a role-playing game to compete with The Elder Scrolls IV: Oblivion, and another publisher was also interested in having Obsidian develop a fantasy RPG. The third publisher was Sega, who wanted the studio to develop an action role-playing game set within the Alien franchise. The game, titled Aliens: Crucible, was to feature base-building, dialogue choices, and character customization. In February 2009, Obsidian sent a prototype to Sega. Sega decided to cancel the game three weeks later without inspecting the demo. The cancellation was officially confirmed in June of that year. At around the same time, Atari again approached Obsidian, this time to revive Baldur's Gate III. Obsidian requested a large budget, which Atari could not afford, and the deal between the two companies fell apart when Atari Europe was sold to Namco Bandai Games.
Despite the cancellation of Aliens: Crucible, Sega was still interested in working with Obsidian to develop another project. Instead of developing a sequel, it was asked to develop a role-playing game based on a new intellectual property. The team came up with an idea of a "spy RPG". Sega approved the idea and decided to help with the game's funding and serve as its publisher. The game would go on to become Alpha Protocol. The game's development was troubled; the team did not have a precise vision for Alpha Protocol and struggled to settle on what gameplay elements to include and what the target audience should be. As a result, it suffered from an identity crisis and featured elements from multiple genres. Sega, for its part, was also unable to make decisions quickly and the publisher cut features from the game after their completion. This resulted in numerous delays and excessively long production time; Alpha Protocol took four years to develop. It was finally released in June 2010.
Their first original game, Alpha Protocol received mostly mixed reviews from critics. It was also a commercial failure for Sega, which led to their decision to put any plans for a sequel on hold. After the game's launch, Urquhart admitted that there was still room for improvements. Even though the game was a commercial failure, it was well received by the community, which has often demanded that Obsidian make a sequel. Urquhart responded by saying that the team hoped that it can develop Alpha Protocol 2, and "do better" with it. Avellone later added that it was unable to develop a sequel because the rights to the game were owned by Sega and crowdfunding would not be a suitable option.
On February 11, 2010, Red Eagle Games and Obsidian announced that they would co-develop one or more games based on The Wheel of Time fantasy novel series by Robert Jordan. On April 25, 2014, however, Urquhart told Computer & Video Games that the agreement between the companies had dissolved after Red Eagle had failed to secure the necessary funding.