Psychonauts studio Double Fine is in a hard second chapter of its Xbox exit. On July 28, 2026, staff began posting publicly about losing their jobs at the San Francisco developer. Neither Double Fine nor Xbox has published a headcount, role list, or formal layoff statement as of this writing. The cuts land weeks after Xbox returned the studio to independence with its catalog intact.
What staff are saying vs what is on the record
Treat the July 28 cuts as real for the people posting about them, and unfinished for everyone else. Impacted roles and totals are not in an official Double Fine blog post. It is also not clear from public statements whether the reductions were ordered by Xbox during the handoff or decided by Double Fine management once the studio was on its own. Given the Independence Day framing, studio-side right-sizing is the more likely path, but that is inference, not a memo.
The independence deal Xbox already published
On July 6, Xbox CEO Asha Sharma posted the restructuring note to Xbox Wire. The division-wide plan calls for about 3,200 role cuts across FY27, including about 1,600 that day, plus four studios leaving Xbox. Double Fine is in the indie lane with Compulsion:
Compulsion Games and Double Fine Productions will return to management and transition to independent studios with their IP, catalog, and runway for their next games.
That sentence is the load-bearing one for fans. Psychonauts, Keeper, Kiln, and the rest of the owned catalog stay with Double Fine under that transition language. Sharma also framed the wider portfolio reset around Xbox losing money on studio ownership ("64 cents for every dollar we invested" in a typical year) and choosing not to keep every indie house in-house.
Double Fine's own Independence Day note
The studio published Double Fine is Independent again the same week, signed "Tim & All at Double Fine":
Once again, Double Fine Productions will be an independent studio. We're thankful to everyone at Xbox for seven great years together, and for working with us to reach an outcome which preserves our history and culture, and returns ownership of our games to us.
