Tim Schafer Reveals Why He Almost Refused to Sell Double Fine to Xbox

Tim Schafer did not want to sell Double Fine to Microsoft. He was skeptical of the company’s track record with studios and had no intention of handing over the independent developer he founded. Yet the acquisition happened anyway in 2019, and Schafer has now spoken openly about the conversations that changed his mind, as well as the leadership shift that ultimately ended Double Fine’s time under the Xbox banner.

Phil Spencer Made the Pitch

Speaking to journalist Jason Schreier at Bloomberg, Schafer recalled his instinctive reaction when Xbox first approached him: “I don’t want to be acquired by you. You love closing studios.” His concern was not unfounded, given Microsoft’s history of shutting down development teams after bringing them in-house. What moved the needle was Phil Spencer, who was leading Xbox at the time and saw Double Fine’s catalog as a strong fit for the Xbox Game Pass subscription service. Spencer’s argument was straightforward: even if Double Fine’s games rarely posted massive commercial numbers, they belonged on the service.

Matt Booty, who oversaw Xbox Game Studios, added further reassurance by explaining what the company called a “limited integration” model, which was designed to let acquired studios retain a high degree of creative autonomy. Schafer did not take Booty’s word for it. He reached out directly to the team at Twisted Pixel, which had gone through a similar process, to verify that the promises were genuine. Satisfied with what he heard, he agreed to sell.

Seven Years of Relative Freedom

For most of its time inside Xbox, according to Xboxygen, Double Fine operated with broad creative latitude. The studio shipped Psychonauts 2 and developed smaller, more experimental projects including Keeper and Kiln. Schafer has said he valued the connections with other Xbox-affiliated studios such as Obsidian Entertainment and Compulsion Games, describing the arrangement as something like a “federation of independent developers” backed by Microsoft’s financial resources.

A Leadership Change Signaled the End

That dynamic shifted in February 2026 when Phil Spencer announced his departure from Xbox. His successor, Asha Sharma, visited Double Fine as part of a listening tour, but Schafer noted quickly that her priorities were different. As Sharma began speaking publicly about Xbox’s financial challenges and the need to return to growth, Schafer sensed trouble ahead. He described picking up on the signs gradually: unreturned messages, subtle changes in tone. “I knew before I knew,” he said.

On July 6, Xbox announced it was releasing five studios, Double Fine among them. Schafer admitted feeling “miserable” at first, then motivated. “Nobody is shutting down Double Fine except me,” he said, adding that the news had acted as a creative reset for much of the remaining team. Microsoft provided an undisclosed sum to ease the transition, though the studio still had to cut 23 staff members, bringing its headcount to fewer than 70 people.

Back on Its Own, With Community Support

Double Fine is now pursuing new funding sources. The studio recently launched a Kickstarter campaign for Amnesia Fortnight 2026, a two-week game jam initiative. Its initial goal of 400,000 dollars was surpassed, suggesting the studio retains a loyal audience willing to support its next chapter directly.

Sources: Xboxygen