Double Fine Lays Off 25% of Staff Following Xbox Separation

By Sakib Khandokar, Lead Analyst Published Jul 28, 2026, 8:33 PM UTC 2 min read

News Brief Official source checked High confidence

Double Fine Lays Off 25% of Staff Following Xbox Separation

Double Fine, best known for creating the 2005 platform game Psychonauts, has laid off 25.6% of its staff. The studio announced the downsizing on July 28, 2026, confirming the cuts are a direct result of becoming an independent company after Xbox unloaded the studio earlier that month.

Quick Facts

Developer: Double Fine
Parent Company Split: Separated from Xbox following restructuring
Layoff Scale: 25.6% of staff (shrinking from roughly 90 employees)
Announcement Date: July 28, 2026
Studio Status: Fully independent, retaining its IP, catalog, and runway for future games

The Transition to Independence

According to statements from both Double Fine and Xbox, the studio returned to its independent status earlier in the week. As part of this separation, the developer gets to keep its intellectual property, catalog, and runway for upcoming projects.

"As a small, tightly-knit team, these actions are not taken lightly," Double Fine said in a statement. "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. The people we are losing were all important. They all made an impact on our games and culture, and they will be missed."

Reporting from Jason Schreier revealed that Double Fine operated as a roughly 90-person team prior to the cuts. The reduction aligns the studio's headcount with a manageable size for its new independent operations.

Broader Xbox Restructuring Context

The separation and subsequent layoffs arrive three weeks after Xbox revealed massive restructuring efforts. On July 6, 2026, Xbox CEO Asha Sharma sent an internal email announcing the most significant restructuring in company history, affecting thousands of employees. A total of 3,200 positions were slated for cuts, with 1,600 employees laid off immediately alongside four studios leaving for new management.

Alongside Double Fine, Compulsion Games—developer of We Happy Few and South of Midnight—also transitioned to self-management while retaining its IPs. Xbox confirmed that Double Fine is now fully independent and manages its own operations moving forward.