Double Fine Leaves XBOX After its Games Fail to Deliver Strong Commercial Results

Double Fine is independent again after seven years under Xbox, but the studio’s departure has already created plenty of debate about what happened during its time under Microsoft. The discussion became even louder after Double Fine launched its recent Kickstarter campaign for Amnesia Fortnight, which was accompanied by a satirical video poking fun at some of the things the studio dealt with while working under Xbox. 

While the video was clearly intended as a joke, it has not gone down particularly well with everyone, especially some XBOX fans who believe Double Fine wasted an opportunity to make bigger games.

Now, a new interview with Bloomberg has shed more light on what actually happened behind the scenes. 

Double Fine founder Tim Schafer discussed the studio’s relationship with Xbox, its creative decisions, and whether the company ever pushed the team toward games that were unlikely to make money. 

The story goes back to a period when Double Fine was looking for financial security while working on Psychonauts 2. The game had a publisher involved, but that company became caught up in a criminal investigation involving insider trading, leaving Double Fine in a difficult financial position. 

With the studio needing additional support, Microsoft eventually stepped in and bought Double Fine in 2019. The arrangement fit into XBOX’s broader approach at the time, which allowed certain studios to operate with a significant amount of independence.

That limited-integration approach is particularly important because it appears XBOX genuinely allowed Double Fine to make the games it wanted. There had been questions about whether the studio’s autonomy was simply a public-facing promise, with XBOX executives potentially able to step in whenever they wanted and redirect development toward more commercially appealing projects.

There is even an earlier example involving Twisted Pixel that helps explain how this arrangement worked. When XBOX decided to move away from the studio’s focus on Kinect and motion-control games, it did not shut Twisted Pixel down. Instead, the studio was allowed to become independent again, with XBOX providing financial support to help it continue operating. 

For Double Fine, the arrangement had obvious benefits. Microsoft provided the financial backing while the studio could continue developing the kinds of unusual and creative projects it had become known for. At the same time, Double Fine’s games were a natural fit for XBOX Game Pass, which was increasingly becoming a major part of Microsoft's strategy. 

The problem is that creative freedom doesn't always lead to commercial success. 

During its seven years under Xbox, Double Fine released two major projects that became the focus of much of the criticism: Kiln and Keeper. Both were considerably smaller than the kind of games many fans associate with Double Fine, such as Psychonauts and Brutal Legend. 

While Keeper received praise from some players for its art direction and unusual atmosphere, it did not become the commercial success that XBOX would have wanted from a studio it had invested in.

That is where the frustration surrounding Double Fine’s recent Kickstarter campaign comes from. The studio jokingly asked for $100 million to make Brutal Legend 2, with the request clearly presented as satire. But because Double Fine had spent years under Xbox, some fans have looked at that joke differently. 

Their argument is straightforward: Microsoft had the money to support the studio, so why did Double Fine spend that time making smaller experimental projects instead of returning to the franchises that people were asking for?

The answer appears to be that XBOX really did let Double Fine choose what it wanted to make. Schafer explained that Keeper was not created because the team believed it would lose money. The developer behind the project came up with the idea, unsure how XBOX would react to such an unusual concept. 

That does not mean XBOX had no involvement. Games still went through a greenlighting process, meaning Microsoft ultimately had to approve projects before development could move forward. But the evidence presented in the interview suggests that the company was willing to respect Double Fine’s creative direction rather than forcing the studio to make a sequel to one of its established franchises.

The bigger issue is whether Double Fine used that freedom effectively. The studio had seven years, built up its team, and had Microsoft’s money behind it. One could fairly ask in business terms why it only produced a couple of smaller games in that time. 

That becomes even more complicated when you consider Psychonauts 2. 

Xbox's acquisition arguably helped ensure that the game actually reached release. Without Microsoft's financial backing, Double Fine may have struggled to complete the project after its previous publishing situation collapsed. 

Schafer also suggested that the studio's fate became clearer after Phil Spencer stepped down and Sarah Bond's leadership direction became more influential. Double Fine was not profitable, and both Kiln and Keeper were considered commercial disappointments. 

XBOX has increasingly focused on its biggest franchises and the projects capable of generating significant returns. That represents a major shift from the earlier philosophy of allowing smaller studios to experiment and create unusual games for Game Pass. 

Schafer himself did not frame his career around whether the situation was fair or unfair. Instead, he compared his position to being the captain of a small fishing boat, where the goal is simply to keep moving forward and to figure out which obstacles and opportunities lie ahead.

Double Fine’s decision to lay off 23 of its employees during the transition compounded the uncertainty of its future. However, the studio is now trying to build a new path as an independent developer. 

Its Amnesia Fortnight Kickstarter has already reached its goal, allowing the team to continue experimenting with new concepts and potentially identify smaller projects that can eventually enter production.

That approach also shapes Double Fine Action Labs, which focuses on creating smaller games rather than immediately attempting another massive production. 

The studio has already announced Thank You, Bus Driver, a game that puts players in the role of a reckless bus driver. It is another example of Double Fine leaning into smaller, unusual ideas instead of immediately returning to a huge franchise project.

Keeper is also being released on PlayStation 5, giving the game another opportunity to reach players and potentially generate additional revenue. Whether that will be enough to change its commercial fortunes remains unclear, but expanding to another platform gives Double Fine another way to monetize a project that struggled to find a large audience on XBOX and PC.

The reaction from XBOX fans, however, shows that the relationship has left behind some bitterness. Many players argue that Double Fine should have spent its time creating games such as Brutal Legend 2 or returning to its older franchises. 

Others believe the studio was doing exactly what XBOX allowed it to do: experimenting with unusual ideas and taking creative risks without being forced to chase the safest possible commercial opportunity.

That debate probably will not disappear anytime soon. Double Fine's situation is ultimately a complicated example of what happens when a creative studio is given significant freedom but operates inside a corporation that eventually changes its priorities. 

Now that Double Fine is independent again, the studio has another opportunity to prove it can make its creative approach work without Microsoft’s financial backing. 

The Kickstarter success gives it some immediate breathing room, and smaller projects should allow the team to keep developing without taking on the enormous financial risks associated with a major AAA game.

The key question is what comes next. Double Fine still controls franchises such as Psychonauts and Brutal Legend, so a remaster or even a new entry remains possible if the studio believes there is enough demand. For now, though, the team seems focused on smaller projects and getting back on track.

After seven years under XBOX, Double Fine is once again responsible for its own future. Whether that independence leads to another Psychonauts, a return to Brutal Legend, or a completely unexpected new project will depend on how well the studio can turn its creative freedom into sustainable success.