Double Fine lays off 23 after leaving Xbox Game Studios

Psychonauts 2 developer cuts a quarter of its staff in 'painful action'

Double Fine, the studio behind games like Psychonauts 2, Keeper, and Kiln, announced Tuesday that it's laying off 23 developers after Xbox divested from it.

"As a small, tightly-knit team, these actions are not taken lightly," said Double Fine founder Tim Schafer in a statement posted on the studio'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 becoming a size that we can sustain.

"The people we are losing are all important. They all made an impact on our games and culture, and they will be missed."

Double Fine became independent earlier this month as part of a massive Xbox restructuring that is affecting thousands of game developers and multiple game studios. According to Bloomberg reporter Jason Schreier, who first reported the news, around 90 people were employed at Double Fine at the time of the layoffs.

Schafer and other former LucasArts staffers founded Double Fine Productions in 2000, and the studio went on to earn a reputation for making quirky titles, starting with 2005's Psychonauts. In the years that followed, games like Brutal Legend, Stacking, and Broken Age cemented Double Fine as one of the most prolific and creative independent developers.

In 2019, Xbox acquired the company during the troubled development of Psychonauts 2, which is well-recorded in the YouTube documentary PsychOdyssey. Psychonauts 2 was released to rave reviews and a Game of the Year nomination at The Game Awards, while 2025's Keeper was a warmly received atmospheric adventure game.

Earlier this year, Double Fine unionized and launched Kiln, a multiplayer game about pottery, which failed to make much of a splash. A couple of months later, Xbox's new CEO, Asha Sharma, announced that Xbox would be parting ways with Double Fine, Compulsion Games, Ninja Theory, and Undead Labs, stating, "It is neither possible nor desirable to own every great independent studio."

The move forced Double Fine to become independent again during a time of extreme hardship for the video game industry, especially for a mid-size studio like Double Fine. It is the first of the four spun-off studios to publicly lay off developers, with the Bluesky post stating that Double Fine is "committed to supporting each affected person as best as we can."