Double Fine, the studio behind Psychonauts 2, regained its independence from Microsoft on July 6, along with three other studios including Compulsion Games, after seven years under Xbox ownership. The split came amid Xbox's broader reset this year, which included 3,200 layoffs across the company. Double Fine itself was not spared, having to lay off 23 people even as it returned to independence.
Founder and CEO Tim Schafer discussed the departure in an interview with Bloomberg, describing it as a kind of creative awakening for those who stayed. "Some people said: 'I'm checking out, this is one too many battles for me.' But for the rest of us, it's like a creative awakening," he said. Schafer said Double Fine's relationship with Xbox worked well for years under former CEO Phil Spencer and Xbox CCO Matt Booty, who had assured him the studio could remain self-sufficient. That changed when new Xbox CEO Asha Sharma took over, shifting the company's mission away from what Schafer described as Double Fine's original arrangement to simply put great games on Game Pass.
Schafer said the process of losing clarity about Double Fine's future was gradual rather than sudden — people at Xbox stopped responding to his messages, and he sensed the change before receiving any formal confirmation. He said he doubted any level of profitability could have saved the studio absent a breakout hit. Bloomberg reported that as late as early summer, there was still no clarity from Sharma's team about what was planned for Double Fine.
Schafer pushed back on the idea that Double Fine deliberately made niche games without commercial ambitions. "We never actively tried to make a game we thought was going to lose money," he said, citing Keeper, the studio's 2025 release, as an example of a game he believes has mass-market appeal despite its art-house appearance. He also said he still has hope for Kiln, the studio's less well-received pottery party game from earlier this year. Keeper was shadow-dropped on PlayStation 5 this week, which may give it a chance to find a new audience.
Schafer summed up his approach to the studio's precarious position with a metaphor: "No one puts Double Fine out of business except for me. Asha's not going to shoot my dog. I'm going to shoot it. But I'm not going to shoot it because it's going to do great. A lot of people want to walk the dog." He said the studio plans to pursue port and remaster work to stay afloat while incubating its next projects, and has launched a $400,000 Kickstarter for its next game jam. Double Fine also recently announced a new game, Thank You Bus Driver, in which players take on the role of a bus driver seeking gratitude from passengers.