Developer Double Fine, known for its work on titles like Psychonauts, has undergone a significant staff reduction, laying off 25.6 percent of its employees. This downsizing occurred three weeks after Xbox announced widespread restructuring efforts that impacted numerous studios. The layoffs were confirmed on July 28, 2026, and are a direct consequence of Double Fine transitioning back to an independent company.
In a statement, the studio acknowledged the difficulty of the decision, emphasizing that the move was made to ensure the "survival of our studio" and to align its size with sustainable independent operations. Double Fine assured that all departing employees were valued members of the team who made significant contributions to the company's games and culture. The studio committed to providing comprehensive support to those affected.
Xbox corroborated the information, stating that Double Fine has now fully regained its independent status. The studio retains ownership of its intellectual property, game catalog, and the resources necessary for future projects. A spokesperson for Xbox indicated anticipation for Double Fine's future endeavors as an independent entity managing its own operations.
Double Fine is a studio of approximately 90 individuals, meaning the recent cuts affected around 25.6% of its workforce. This marks a return to independence for the studio, which, along with Compulsion Games, was revealed to be regaining autonomy earlier this month. Both studios kept their IPs intact during these transitions. Double Fine was originally founded as an independent studio in 2002 by Tim Schafer, a former LucasArts employee.
These studio transitions occur in the wake of a larger restructuring at Xbox, initiated by CEO Asha Sharma on July 6, 2026. This internal email detailed what was described as the company's most significant restructuring in its history, projected to impact thousands of employees. Initially, 3,200 employees were affected, with 1,600 laid off on the day of the announcement. This broader initiative reportedly impacts about one-fifth of Xbox's overall staff and a number of studios acquired by the company over the preceding five years. Sharma's email stressed the importance of innovation and adapting to market dynamics, stating, "History is full of companies that mistake longevity for inevitability. We will not be one of them."