Double Fine Productions, the studio behind Psychonauts, Psychonauts 2, Keeper and Kiln, has laid off 23 employees, according to a statement from founder Tim Schafer shared on the studio's Bluesky account. "Today, Double Fine Productions let go of 23 members of our staff," the statement reads. "As a small, tightly-knit team, these actions are not taken lightly. 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."
According to Bloomberg's Jason Schreier, Double Fine employed around 90 people before the cuts, meaning roughly a quarter of the studio's workforce has been let go. Among those affected is Ben Johnson, a game designer on Kiln, who posted about the layoffs on Bluesky. Schafer's statement added that "the people we are losing were all important," that they made an impact on the studio's games and culture, and that Double Fine is "committed to supporting each affected person as best as we can."
The layoffs come less than a month after Xbox spun Double Fine off into an independent studio as part of a broader restructuring at the Xbox division. That shake-up, driven by concerns over Xbox's profitability and years of studio acquisitions, resulted in 1,600 layoffs about a month earlier with roughly 1,600 more planned, and reportedly totals 3,200 job losses overall. Along with Double Fine, Compulsion Games, Ninja Theory, and Undead Labs were also set loose as independent studios, with Xbox CEO Asha Sharma saying it is "neither possible nor desirable to own every great independent studio."
An Xbox spokesperson responded to the layoffs with a statement: "Double Fine fully returned to independent management earlier this week, with their IP, catalog, and runway for their next games. As they begin their next chapter as an independent studio, we look forward to seeing what they create next." Xbox declined to specify how much runway the studio has, and said Double Fine now fully manages its own operations.
Double Fine was founded in 2000 by Tim Schafer and other former LucasArts developers, releasing its first game, Psychonauts, in 2005. The San Francisco studio built a reputation for quirky, experimental titles such as Brutal Legend and Broken Age, often struggling to fund projects before Microsoft acquired it in 2019 during the troubled development of Psychonauts 2. Under Xbox, Double Fine released Psychonauts 2 in 2021 to strong reviews, followed by Keeper in 2025 and Kiln earlier this year; both later titles were described as well-received creatively but not commercially strong. The studio also unionized earlier this year, according to Polygon.
Double Fine is the first of the four newly independent Xbox-spun-off studios to publicly announce layoffs, though PC Gamer notes that Compulsion Games said it needed work just a week after its own split, with employees reportedly job-hunting even before the announcement. It remains unclear exactly how many employees remain at Double Fine following the cuts.