The future of Double Fine Productions, founded over 25 years ago and purchased in 2018 by Microsoft, is more uncertain than ever as the tech giant revamps its console strategy and looks to spin off the Psychonauts 2 studio or close it altogether. With discussions underway about how to unload a number of smaller Xbox studios, Double Fine responded in a very Double Fine way.
While the limited-integration studio based in San Francisco has not responded to requests for comment about the negotiations currently underway, it did take to social media last night with a brief acknowledgment of the situation: a single sweat smile emoji. Microsoft is currently in talks to close or spin off Compulsion and Ninja Theory as well.
😅
— Double Fine (@DoubleFine) June 16, 2026
Last year, the studio shipped Keeper, an excellent adventure game that seemingly not enough people played. Earlier this spring, it shipped Kiln, a clever pottery party game that also didn’t make a big splash. These are exactly the type of games you’d buy Double Fine to have it make—unique, experimental genre mashups that push creativity amid a field crowded by sequels and copycats. Unfortunately, the price tag of this prestige is not one the new Microsoft appears willing to foot any longer.
The Double Fine documentary about the making of Psychonauts 2 included frank, behind-the-scenes moments from around the time of the studio’s acquisition in 2019. The sale raised questions about the future of Double Fine’s independence and the creative freedom of its staff, but also provided financial security and some one-time bonus and stock payouts to some of the developers who had stuck it out at the studio during tough times.
“Being independent for almost 20 years has given Double Fine a distinct identity and unique spirit that goes really deep here, and no one can change that. And nobody wants to,” studio head Tim Schafer said back in 2019. “Microsoft wants us for who we are and the kind of games we’re already making.”