Double Fine laid off 23 employees around July 28, 2026, following its separation from Xbox and return to independent status [1, 2, 3, 4, 5]. The studio had approximately 90 employees before the layoffs, making these cuts roughly 25% of its workforce [1, 2, 4, 5].

The layoffs came after Double Fine was spun off from Xbox in early July 2026, retaining its intellectual property and catalog as it resumed management of its own operations [2, 6, 4]. This followed a major restructuring announced by Xbox CEO Asha Sharma on July 6, 2026, which included layoffs of thousands of employees and plans to spin off several studios including Double Fine, Compulsion Games, Ninja Theory, and Undead Labs [1, 2, 6, 4, 5].

Double Fine founder Tim Schafer described the layoffs as extremely painful but necessary for the survival of the studio. He said, "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." [1]

A Double Fine statement added, "As a small, tightly-knit team, these actions are not taken lightly. We are committed to supporting each affected person as best we can, and we thank them for their hard work and commitment to the creative spirit we cherish here at Double Fine." [2]

An Xbox spokesperson confirmed, "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." [4]

Double Fine was originally founded in 2000 by Tim Schafer and ex-LucasArts employees as an independent studio before joining Xbox in 2019 [1, 2, 6]. Its recent releases include Psychonauts 2 (2021), Keeper (2025), and Kiln (2026), though Kiln failed to gain much popularity [1, 6, 5].

Double Fine’s next steps as a fully independent studio will involve adjusting to a smaller, sustainable size after losing Xbox's backing. The layoffs mark a significant reorientation as it seeks stability as an independent developer.