Double Fine layoffs hit during Xbox separation, roles and headcount undisclosed

Double Fine, the studio behind Psychonauts 2, has been hit with layoffs during its separation from Xbox. Kotaku reported the cuts on July 28, noting that the number of affected workers, their roles, and the precise reason for the layoffs were not yet clear.

The timing is the concrete context for players. Double Fine is being spun out of Xbox and is expected to become independent again after Microsoft’s broader gaming restructuring. Kotaku reports that Xbox has said Double Fine will be able to keep its owned IP and catalog after the separation.

The studio’s recent output includes Psychonauts 2 in 2021, Keeper in 2025, and Kiln earlier this year. The layoff report does not identify a canceled game or a specific project change, so the immediate impact is on studio staffing rather than a confirmed product timeline. Kotaku said it contacted both Double Fine and Xbox for comment.

Until headcount and project details are public, the practical effect remains limited to the confirmed staffing cuts. For players, the open question is what independence means for Double Fine’s project funding and whether the studio can keep its experimental development style after leaving Xbox.

Sources: Kotaku, Reddit