Double Fine Productions is starting its new chapter as an independent studio with a painful cut. Founder Tim Schafer confirmed on July 28, 2026 that the Psychonauts 2 developer laid off 23 employees, weeks after Double Fine was spun off from Xbox as part of Microsoft's ongoing restructuring of its gaming division.
Schafer's Statement
Schafer didn't soften the announcement: "Today, Double Fine Productions let go of 23 members of our staff. As a small, tightly-knit team, these actions are not taken lightly." He tied the decision directly to the studio's new independent status, explaining that only the survival of the studio would make leadership consider it: "Our transition to becoming an independent company also means becoming a size that we can sustain." Schafer added that Double Fine is committed to supporting each affected person as best it can, though specifics on severance or continued support weren't detailed.
What Independence Actually Means Here
Double Fine was one of five studios Microsoft spun off from Xbox this year as part of a wider restructuring that has already cut roughly 1,600 Xbox jobs, with a reported target of around 3,200 total positions eliminated by the end of fiscal year 2027. As part of the split, Double Fine retains its intellectual property and existing game catalog - including Psychonauts and its sequel - while Xbox continues to provide funding for the studio's next projects. In theory, that's a favorable outcome compared to an outright studio closure. In practice, it still meant Double Fine had to shrink to a size it could sustain without Microsoft's larger corporate backing underneath it.
