Another Ex-Xbox Studio Hit With Layoffs Following Exit From Microsoft

Published Jul 28, 2026, 5:16 PM EDT Steven is a seasoned writer specializing in the video game and technological fields, with years of experience creating reviews, features, and industry analysis. Passionate about the gaming world and its evolving culture, Steven always wanted to combine his enjoyment of writing and love for gaming in a way that can provide insightful coverage for players and enthusiasts alike, striving to provide this since he joined Screenrant in 2024. Sign in to your ScreenRant account Although the announcement of the major layoffs coming to just about every aspect of Xbox's studios was leaked roughly a week before they went into effect on July 6, 2026, that didn't stop the impact from being one of the most brutal layoffs in gaming history. Along with job loss for thousands of employees as a part of the Microsoft restructuring, several partnered studios were also let go in the process, forcing them to become independent. While several studios had been sold off rather than returning to their indie status, one of the many promising development teams that ended up retaining its own identity just got another major blow, making the already heartbreaking series of events even worse than before. As a result of going independent and having to fund their own studio, Double Fine announced today on Bluesky that the studio has been forced to lay off 23 members of its staff to stay afloat as an independent organization. The team had been made up of roughly 90 employees before the announcement, meaning that the studio lost over a quarter of its original developers. Unlike Microsoft's more distanced restructuring efforts, the developers at Double Fine noted that the decision was far from easy given the small team size, and that each and every member affected by the decision was an important member of the studio that contributed greatly to its past releases. Although Double Fine is far from the only studio that has taken a major employee hit as a result of Microsoft's massive wave of layoffs, the fact that the studio was forced to lay off its own team members is a particularly unfortunate coda to the saga, souring the originally optimistic note of Double Fine being able to successfully go independent rather than be closed directly. Having released dozens of fantastic games, from the co-op Costume Quest, the Grim Fandango RPG, and ever-iconic Psychonauts series, Double Fine has put out plenty of classic games over the years. The hit feels especially hard to bear considering how long the studio has been continually offering unique experiences over the 26 years since their founding. The news does come with the silver lining that the rest of the development team seems safe for now, and can hopefully either continue to operate as an independent studio thanks to its smaller size or eventually get picked up by a larger publisher again. With how unsteady the current gaming climate even outside of Xbox seems to be, the best we can do is hope for the best for everyone involved with the process. Xbox Founded November 15, 2001 Owner Microsoft Known For Halo, Forza, Gears of War