Double Fine Faces Job Cuts Following Xbox Transition

Double Fine, the studio behind Psychonauts 2, is currently facing layoffs, as reported by an outlet.

Details regarding the number of affected employees and their specific roles remain unclear, along with the exact reasons for the layoffs. Some team members have started sharing their experiences on social media. The studio has been contacted for further comments.

Additionally, inquiries have been made to Xbox, Double Fine’s former parent company, to clarify the studio’s current status during its transition back to independence. Recently, it was announced that Double Fine would once again operate as an independent studio following significant changes at Xbox, which stemmed from the division’s ongoing profitability issues and a series of acquisitions that stretched resources thin. Just a month ago, Xbox laid off 1,600 employees, with plans for another 1,600 layoffs over the next year. It’s uncertain whether the layoffs at Double Fine were initiated by Xbox or the studio itself, but given the context, it seems more likely to be a decision from Double Fine.

Founded in 2000 by Tim Schafer and other former LucasArts developers, Double Fine has been a staple in the gaming industry for over two decades, debuting with Psychonauts in 2005. The San Francisco-based studio is known for its innovative and quirky games, many of which originated from internal game jams. Although it maintained its independence for many years, funding challenges led to its acquisition by Xbox in 2019. Under Xbox, Double Fine released Psychonauts 2 in 2021, followed by Keeper in 2025, which received praise but didn’t perform well financially, and Kiln earlier this year, which was well-received but also struggled with popularity. Xbox head Asha Sharma has stated that Double Fine will retain ownership of its intellectual properties and game catalog after the separation.