Just like they did with Fallout: New Vegas, At one stage they had larger ambitions
Obsidian Entertainment attempted to create a spin-off installment in The Elder Scrolls series, but Bethesda rejected the idea. Obsidian Entertainment is probably most well-known for creating Fallout: New Vegas, a Fallout franchise offshoot that took place between Fallout 3 and Fallout 4. Despite the popularity and acclaim that New Vegas received from fans, Bethesda was unwilling to work with Obsidian again on The Elder Scrolls.
Chris Avellone, a co-founder and former Obsidian writer, broke the news of this potential Elder Scrolls spin-off. Avellone stated in a series of messages on X that he personally pitched the idea of Obsidian releasing Elder Scrolls spin-off titles in between core releases (Morrowind, Oblivion, Skyrim) made by Bethesda Game Studios. Avellone stated that this pitch “didn’t gain much traction,” implying that Bethesda was dissatisfied with both the positive and negative reception to Fallout: New Vegas.
Another reason Bethesda may have passed on this pitch, according to Avellone, was The Elder Scrolls Online. ESO was originally released in 2014, but it had been in development for seven years prior to that. As a result, when Avellone and his colleagues at Obsidian attempted to sell this idea to Bethesda, the publisher undoubtedly knew that The Elder Scrolls Online was in the works. Given this, it’s difficult to blame Bethesda for passing on Obsidian’s pitch, especially given that ESO is still going strong after nearly a decade and receives constant support.