Double Fine Lays Off 23 People Just Three Weeks After Winning Back Its Independence From Xbox

We hoped the feel-good story of the summer would stay feel-good a little longer. On July 6, Double Fine announced it was an independent studio again after seven years under Xbox, keeping ownership of its games and promising more news on what comes next. On July 28, that news arrived, and it was not the kind anyone wanted: the studio has let go of 23 members of its staff.

The statement, posted on the studio's official Bluesky account and signed simply "Tim" by founder Tim Schafer, does not dress anything up. "As a small, tightly knit team, these actions are not taken lightly," it reads. "Only the survival of our studio would ever make us consider such a painful action. Our transition to becoming an independent company means becoming a size that we can sustain."

A painful start to a new chapter

For a team the size of Double Fine, 23 people is a significant cut, and the statement acknowledges as much. "The people we are losing were all important. They all made an impact on our games and culture, and they will be missed," Schafer writes, adding that the studio is committed to supporting each affected person as best it can.

The timing is what stings. When Double Fine announced its independence earlier this month, the tone was warm and even optimistic. The studio thanked Xbox for "seven great years together" and for reaching an outcome that preserved its history and culture, along with the rights to its catalog. That catalog is not small: Psychonauts 2, Broken Age, last year's atmospheric adventure Keeper, and this spring's pottery game Kiln all stay with the studio. But keeping your games is not the same as keeping Microsoft's money, and running an independent studio in 2026 means covering payroll without a trillion dollar parent company behind you.

Part of a much bigger Xbox shakeup

Double Fine did not leave Xbox alone. Its spin-off was part of a broader restructuring at Microsoft's gaming division this summer that also saw other teams, including South of Midnight developer Compulsion Games, returned to independence with their games in hand. Compared with the outright studio closures the industry has seen in recent years, letting teams walk away with their IP is a gentler outcome. It is still a wrenching one for the people who lose their jobs along the way.

Double Fine was founded in 2000 and joined Xbox in 2019, back when Microsoft was collecting beloved studios at a rapid pace. Watching it walk back out the door, leaner and self-funded, feels like the end of that era in miniature. We genuinely hope the studio finds its sustainable size quickly, because a world with new Double Fine games in it is better than one without. For now, our thoughts are with the 23 people looking for their next chapter.