Double Fine Announces Layoffs Following Split From Xbox

Psychonauts developer Double Fine Productions was among the five studios spun off from Xbox as part of its ongoing restructuring, and while it (thankfully) avoided closure, the divorce has forced the team to make cuts. Specifically, the studio has announced the departures of 23 staff members.

In a post shared on social media, Double Fine head/founder Tim Schafer writes,  “As a small, tightly-knit team, these actions are not taken lightly. Only the survival of our studio would ever make us consider such a painful action. Our transition to becoming an independent company also means becoming a size that we can sustain.” Double Fine states it is working with affected staff “as best we can” during their transition. 

[image or embed]

— Double Fine (@doublefine.com) July 28, 2026 at 3:01 PM

Double Fine was granted independence from Xbox alongside South of Midnight developer Compulsion Games earlier this month; both studios retained their IP and game catalogs as part of the split. Xbox also spun off three other studios; Ninja Theory and Undead Labs were sold to unspecified buyers, and Arkane Studios’ fate remains up in the air as it undergoes mandatory consultation in France. 

Double Fine’s most recent release is the pottery-themed multiplayer party game Kiln, which launched in April. Under Xbox’s ownership, the team shipped Psychonauts 2 in 2021 and Keeper in 2025.