Double Fine Cuts 23 Jobs in ‘Painful Action’ Following Xbox Restructuring

Renowned game development studio Double Fine—celebrated for creative titles like Psychonauts 2, Keeper, and Kiln—has announced the painful decision to lay off 23 staff members following its recent divestment from Xbox.

“As a small, tightly-knit team, these actions are not taken lightly,” shared studio founder Tim Schafer via an official statement on the developer’s Bluesky account. “Only the survival of our studio would ever make us consider such a painful action. Our transition to becoming an independent company also means resizing to a scale we can sustainably maintain.”

He added, “Every person we are parting ways with is invaluable. They have all left an indelible mark on our games and studio culture, and their absence will be profoundly felt.”

Double Fine regained its independence earlier this month amid a sweeping corporate restructuring by Xbox that has impacted numerous studios and thousands of industry professionals. According to Bloomberg journalist Jason Schreier, who broke the story, the studio’s headcount stood at approximately 90 employees prior to the reductions.

— Double Fine (@doublefine.com) 2026-07-28T19:01:18.106Z

Established in 2000 by Schafer alongside fellow LucasArts alumni, Double Fine built an illustrious legacy defined by imaginative, unconventional games, beginning with 2005’s acclaimed Psychonauts. Subsequent projects such as Brütal Legend, Stacking, and Broken Age cemented its status as one of the most uniquely inventive independent creators in the medium.

Xbox acquired the company back in 2019 during the turbulent final phases of Psychonauts 2‘s production—a journey chronicled extensively in the insightful YouTube documentary series PsychOdyssey. Upon launch, Psychonauts 2 garnered critical acclaim and a coveted Game of the Year nomination at The Game Awards, while the atmospheric adventure Keeper earned warm praise following its release in 2025.

Earlier this year, Double Fine’s workforce unionized shortly after launching Kiln, a pottery-themed multiplayer title that unfortunately struggled to capture a broad audience. Just months later, newly appointed Xbox CEO Asha Sharma announced that the tech giant would be severing ties with Double Fine, Compulsion Games, Ninja Theory, and Undead Labs, noting that “it is neither possible nor desirable to own every great independent studio.”

This abrupt shift has plunged Double Fine back into independence during a punishing era for the broader video game sector, particularly for mid-sized developers. As the first of the four recently spun-off studios to enact layoffs, the team emphasized in its Bluesky update a firm dedication to “supporting each affected person as best as we can.”