Obsidian, and Why Xbox’s Acquisition Strategy is Staying Out of the Way
Studio head Feargus Urquhart and Xbox general manager Mary McGuane explain Xbox’s acquisition philosophy, and how Obsidian has both fit in and remained free.
When Feargus Urquhart walked into a 2018 pitch meeting with then-Xbox senior director of business development Noah Musler, he thought he was pitching
Avowed. But what he was really pitching was the entirety of Obsidian Entertainment.
They were having breakfast at that year’s E3, just after Xbox announced it was acquiring Undead Labs, Playground Games, Ninja Theory, and Compulsion Games, as well as establishing The Initiative. At the time, Urquhart wasn’t even aware of the industry-shaking news. He was, as he tells me, “plugged into his own stuff,” focused on making Avowed look as appealing as possible to people like Musler who could potentially help Obsidian get it out the door in a few years. He made the pitch for Avowed. Musler responded by suggesting Urquhart repeat his pitch again…this time in a bigger room, with more Xbox folks listening in.
It wasn’t until the middle of that week that Musler called Urquhart back and told him that what he had really sold Xbox on was acquiring the entirety of Obsidian, the studio he had been at the head of since 2003.
Obsidian was born from the ashes of Black Isle Studios, which gained fame through games like Icewind Dale, Baldur’s Gate, the first two Fallout titles, and Planetscape: Torment. Black Isle’s 2003 closure came as a result of financial trouble at parent company Interplay. Obsidian was founded soon after, and went on to enjoy 15 years of independent success with games like Pillars of Eternity, Neverwinter Nights, South Park: The Stick of Truth, Star Wars: Knights of the Old Republic 2, and Fallout: New Vegas. With a history like that and no financial need for a parent, why get acquired at all?
According to Urquhart, acquisition by a giant like Microsoft was a leap of faith. But what ultimately sold him on the idea were two things. The first was the substance of what Xbox was pitching: it wanted to let its acquired studios “be who they are” and retain their creative freedom and studio culture, largely unbothered by Xbox mandates.
Creative independence following acquisition can sound like a tall, unbelievable order, though. Why would anyone trust that an enormous corporate parent like Microsoft would adhere to that one, two, five, or ten years down the road, especially in an industry where smaller companies are gobbled up daily? But Urquhart says the second component that convinced him was the people pitching him: he already knew Matt Booty well, and Musler too – enough to have faith in their promises. And then there was Phil Spencer.
“I didn't know Phil Spencer well at that time, I probably only talked to him once or twice up to that point,” he says. “But what's so interesting with Phil is he is this- I don't know. I don't want to say ‘persona’ in the end, because he is Phil Spencer and because he runs all Microsoft games. But now knowing him, and even what I knew [about] him back then, his reputation was just someone who was authentic and someone who doesn't BS and loves games. And that was the trust in that.”
The three of them together convinced Urquhart that he would be bringing Obsidian into a “new Microsoft” of sorts: one worth putting faith in.
The ‘New Microsoft’
Urquhart’s outside impressions were astute: he was getting a firsthand look at a transformation going on within Xbox that, per Mary McGuane, had been going on for much, much longer than the public has been privy to.
McGuane is currently the studio general manager at Xbox Game Studios for Obsidian, Double Fine, and inXile, but she’s held a number of roles in her over 20 years at Microsoft. That experience has allowed her to watch this transformation take place firsthand. In 2018, she was serving as the chief of staff for Xbox Game Studios, giving her a front row seat to its acquisition drive. As she tells it, Xbox’s shift started not in 2018, but way back in 2014, with its acquisition of Mojang. That effort was steered by Matt Booty, who pushed for a very different integration approach.
“Before [Mojang], it was: you’re a part of Microsoft,” McGuane says. “One day you’re [part] of this studio, the next day you’re fully Microsoft. And it had…varying success, I’ll say. So with Mojang, there was an approach taken that we like to call minimal integration, where we looked at the stuff we really needed to have fully integrated: and that’s like IT stuff and security policy, that kind of stuff. But then we really tried to create stability in these studios to not have the acquisition be something where the whole studio lost focus, where the studio was now trying to figure out this thing called Microsoft.”
One look at Minecraft today is proof of how well that went for Xbox. McGuane says that it was Minecraft’s success that allowed people like Booty and Spencer to advocate for that approach widely, building more trust with each success. And so, the gaming giant has taken the same tactic again and again with its acquisitions since, encouraging them to focus on making games with creative independence and using Microsoft’s enormous resources. Studio leadership is encouraged to collaborate with other studio heads and Microsoft leads, comparing notes on games, production, people, and culture. It does make Xbox more focused on established teams with consistent internal cultures, solid track records of games and IP, and veteran leadership. After all, giving that much creative freedom to a studio that doesn’t know what to do with it would ultimately be hurtful to the strategy.
Independence doesn’t mean isolation, though. McGuane says that in Obsidian’s case, for instance, she speaks with someone at the studio every few days, and there are connection points all throughout all the Xbox-owned studios. It’s not, she says, that they shut the door and Xbox knocks once a year to collect what it’s owed.
In return, Xbox gets games, obviously. But it’s not just after blockbusters. By relieving the pressure of having to scramble for publishing deal after publishing deal, McGuane says that studios like Obsidian can, if they so choose, pursue smaller projects alongside their larger endeavors. Grounded and Pentiment are prime examples of this, where Xbox’s safety net helped the developer juggle multiple balls at once. Grounded’s early access success was significantly bolstered by Game Pass and Xbox marketing, which allowed Obsidian more time and energy for Pentiment. And both games will help The Outer Worlds 2 and Avowed down the line. For Xbox, all of this contributes to filling up Game Pass.
Though Obsidian has been a part of Xbox’s house for nearly four years, its project line-up internally still looks quite similar to how it did when it was first acquired. But that’s okay. McGuane tells me Xbox is playing the long game with not just Obsidian, but all its acquisitions. She says it’s not interested in churning out a giant game per studio and then tossing them by the wayside. Rather, it’s all part of a larger picture, building a sustainable creative infrastructure that will still be making new things years from now, built from ideas that haven’t even been dreamt up yet.
“My hope [five years from now] would be that [our studios] feel as supported as they do today, that the [creatives are] still able to make the games that they love,” McGuane says. “The studio employees are stoked to be making these games, getting them into the hands of the player – and that it's supporting all of the strategies that we have five years from now, which I think will be some of the strategies that we have today. But for me, my hope is that the studio always feels the same level of support and the same creative freedom.”
Obsidian, But More
Which brings us back to Urquhart, who has now had four years with Xbox to see if the company would deliver on its big promises of freedom. While it seems unbelievable that hardly anything has changed at Obsidian beyond the support networks McGuane describes, Urquhart insists that for the most part, Obsidian is still Obsidian.
There are some changes, of course. It’s gotten a little bigger since (from around 170 to 240 employees), and COVID-19 shook up the day-to-day as it did for every studio. But, he says, Obsidian has been largely unmoved; down to tiny details, like its 401k, medical insurance, and payment system. In fact, the biggest shift Urquhart can point to is, he says, a boring one: he had to learn a bit more about how the finances of such a large company worked.
What’s more, Urquhart has observed a massive improvement in one particular specter from his own past relationship with Xbox: it’s dropped its past tendency to mandate developers work on certain kinds of technology it’s trying to push. Like, say, the Kinect.
Pentiment - Xbox and Bethesda Games Showcase 2022
“The Kinect is an example of something that became a requirement, [even for us],” he says. “We were making a game for Microsoft back in 2011 [likely its cancelled RPG, Stormlands], and that’s when the Kinect was incredibly important. And there were a lot of things where they wanted the Kinect to be more– the Kinect was cool, but how much of it really needed to be a game interface? That was one of the real questions. So there was that feeling of the forced nature of things. I hate to even say this, but I’m going to just say, [it was] one of the things that was on the lists of stuff that we had to [have].
“So we were making a role playing game and someone had this idea, and you think it was an idea that would've just been nicked off on the first list. The idea was, you’re playing the game, and you’re not doing so well in health, but your friend comes and gives you a back rub and that actually gives you more health. We laughed uncomfortably… and then it didn’t come off the list.”
Of course, Xbox is still pushing new technology alongside Microsoft, the most obvious of which are its cloud endeavors. But those efforts are now more suggestions, and generally are coupled with significant support from Xbox itself, to implement where and how developers find a fit. Urquhart personally is excited about the possibilities for the technology, especially the ways in which mobile cloud gaming might allow Obsidian games to reach people who can’t afford a console or high-end PC. And then there’s the support Obsidian gets from Xbox’s user research group, which helps studios better understand how people are playing their games and how they can better reach those players in the future.
With Pentiment and Grounded’s full releases imminent, Obsidian is turning its attention to The Outer Worlds 2 and Avowed – but also to its longer-term future. There’s no clear set of bullet points for what makes an Obsidian game, Urquhart says, despite the studio’s bent toward RPGs and love of narrative. But he’s especially excited about the foundation Pentiment and Grounded laid for Obsidian to continuously juggle both large and small projects simultaneously. Urquhart’s not going to set down a mandate that the studio needs a specific number or type of games in the works at once, but he does like that his most senior colleagues can take a break from bigger games and stretch their creative muscles if they want to. Working on giant RPGs day in and day out can be tiresome, after all – and Obsidian’s largest teams, he says, frequently learn new things from their smaller, more adventurous projects.
Though lacking a specific formula for the future, Urquhart says Obsidian’s plans somewhat boil down to answering the question: what do RPG players want? And how can Obsidian push the medium forward?
“Every time, we need to go, ‘How do we do it better? How do we put something more in the world? How do we give [players] that emotional reaction? That thing where they lost a weekend to something we created?’… It is just always thinking about how to make that RPG experience more for someone, and not just more, but truly something that they appreciate more than what they played last time.”
That Xbox doesn’t just support this approach, but actively encourages it, seems to prove that the acquisition experiment is working for both parties. With Pentiment and Grounded 1.0 imminent, we’re now poised to see what fruit such a collaboration can produce.
