This year, one of E3’s biggest surprises came at Microsoft’s Xbox press conference, when the platform holder announced the latest in their spree of game developer acquisitions: beloved independent developer Double Fine Productions. Double Fine Productions started almost 20 years ago to, ironically enough, create an original Xbox title published by Microsoft, but that relationship fell apart, and Double Fine has navigated the games industry on its own since then. Until now, that is. Variety had the chance to sit down with Double Fine founder and studio head Tim Schafer about what that acquisition means to the company, it’s in-development games, and what his read is on an industry that appears on the cusp of some very radical changes (with a brief guest appearance by Double Fine “Vice President of Biz” Greg Rice).

Arthur Gies: The “Psychonauts 2” demo gave me the hardest core sense of Deja Vu I’ve gotten from anything I’ve ever seen at any E3. Because when I bought an Xbox, there was that crop of games Microsoft announced, and I remember very religiously following “Psychonauts” on its very extended journey to release, and when it came out I got super into it. So [this demo] threw me back almost exactly 14 years ago.

Tim Schafer: Well that’s great. That means a lot. We have a lot of the same team. Peter Mcconnell, who composed most of my games, did the music for both. The actors are all back, Richard Horvitz for Raz and all the other voices. We also have a lot of new people working on it, bringing in fresh ideas. But a lot of people are the same. [With] me writing the dialogue, you know, it’s crazy to jump back into these characters, because we worked really hard to make them feel real to us, you know, so that’s nice to hear that it makes you feel the same way.

Arthur Gies: You’ve all done a lot of games over the last six or seven years as Double Fine has found an identity as an indie developer without a big publisher behind it. But it seems like Psychonauts has been the [game] that people kept asking about. Do you feel a specific kind of obligation or pressure to make this game one kind of thing, as opposed to something else?

Tim Schafer: I mean, you could call it out flagship IP, the thing that started the company. It was the idea for the game that I wanted to make that made me make a company in the first place. And the first thing we did was sign with Microsoft to make the game. So this is a relationship that goes back to the formation of the company.

Arthur Gies: It was a complicated relationship.

Tim Schafer: A complicated relationship, but you know, they didn’t manage to make it through to the end and that’s probably why they bought us, so they could have a chance to finish a Psychonauts game, obviously. But you know, it didn’t end so badly that we didn’t work with them again. We worked with [Xbox] on “Iron Brigade,” and then “Once Upon a Monster,” and “Kinect Party” and those kind of things. So we’ve kept the relationship. So I’ve known Phil and those guys like 16 years. So it seemed natural in a strange, poetic way coming back to them to work on the second game.

Arthur Gies: Psychonauts has sort of become associated with PlayStation over the last several years. You’ve appeared at Sony’s press conference to announce Rhombus of Ruin. Psychonauts was a crowd-funded game at a time when PlayStation 4 was where indie games lived. Have you experienced any sort of pushback or negative response in the wake of the announcement of the acquisition by Xbox?

Tim Schafer: I mean, we’ve always tried to be pretty agnostic about platform, in a way. A lot of things like our remasters went heavy on the PlayStation platform because Sony worked with us on them. But we really try to be everywhere and we’ve always been on PC and I think PC has been our most consistent platform since Grim Fandango. But I mean, some people are super disappointed. But luckily we’re able to maintain all of our commitments. You know, everything we promised on crowdfunding, we’re still going to deliver on those platforms, and then focus more on Xbox platforms in the future.

Greg Rice: And we have been supporting Microsoft too, and the original Psychonauts game can be played on Xbox One.

Arthur Gies: I still have my original Xbox copy of Psychonauts.

Tim Schafer: Yeah? That’s awesome.

Greg Rice: It’s out of print. You’ll want to hang on to that.

Arthur Gies: I know! It’ll be worth, like, tens of dollars.

Tim Schafer: Yeah, with that Advent Rising ad in the back of the manual, and the slightly faded manual cover that I never liked.

Arthur Gies: So “Psychonauts 2” is still coming out on everything obviously. So Xbox and Microsoft aren’t prohibiting you from sort of following through on all of that?

Tim Schafer: No, they don’t want us to break any of our promises.

Arthur Gies: Is this arrangement allowing you to make “Psychonauts 2” more of the game that you’d hope to make?

Tim Schafer: Yeah. I mean, when you’re working with our crowdfunded budget, and our publisher budget, and you know, our previous publisher was having some troubles on their own. And it moved around the finish line, you know, And we want to make sure we had time to focus — instead of wondering “oh my God, when does the money run out?” we’re asking how do we make this the best game it could be.

Arthur Gies: What is the most tangible benefit to signing with Microsoft in this way, of being acquired? What was the thought process?

Tim Schafer: Well, a lot of it was wanting to focus on creativity instead of making deals. Usually, at E3 we’d be going from meeting to meeting, asking for millions of dollars. And it’s great that we were able to do that and for years, you know, and we’ve been pretty successful at it. But that’s also time that I could be sitting, writing. I could be focusing on the game. And you know, it also gives employees kind of a sense that they can take a breath. Even though we’ve been stable for 19 years, we’re very transparent with the employees. So they know when, like, oh, “we’ve got three months to live,” you know? They know when those things come up. And so it’s stressful for them. Having that structure [from Microsoft] is really great. And then also, the other changes going on in the industry with subscription services coming up, everyone’s going to be trying different things. When we’re looking at other media, we think about Spotify and Netflix and HBO go — which one of those is gaming gonna look more like in the future? But with those services, some of them are great and they’re funding a lot of new content like on Netflix. But with Spotify, like, is that great for musicians? And I think this partnership really puts us in a good place to weather that, that no matter what happens, we’ll be okay.

Arthur Gies: How do you think it affects the way that you can make games?

Tim Schafer: I think it really appeals to our type of game because we make kind of unusual things that, you know, have a hard time getting their audience sometimes in a short amount of time. You know, the word of mouth on Psychonauts grew a lot over time to where it made more money in the last five years than in its first five years. So if someone goes to Game Pass because they want to play Call of Duty or something, and they see that second Psychonauts for awhile and it’s free to them because it’s part of Game Pass I think that that allows people to take a risk on a game that they might be scared to invest $60 in. They can just give it a shot. And I think if we could just get them to try it, then they might find out they love it.

Arthur Gies: Is Game Pass a big part of why Double Fine agreed to be acquired?

Tim Schafer: Yeah. It was a big part of it, because I can see how it would make sense for them to both want us to be part of their company but also to let us be ourselves. If you were them, and you had this thing Game Pass, and you wanted to put a full variety and diversity of content on it, you wouldn’t want to buy Double Fine and turn it into another Forza company. That’s kind why I was making those jokes on stage — you might think acquisition is some sort of absorption and conversion process that would happen. But it’s not. They’re going to let us still be Double Fine. And of course, someone might be suspicious of that. But Game Pass makes me understand from their point of view of why they would be motivated to allow us to make our games.

Arthur Gies: What do you think the future of crowdfunding for developers at your sort of size is?

Tim Schafer: Well, there was a time when I thought it was going to keep growing and eventually fund everything. But it seemed to have some sort of limits around $5,000,000 and it’s peaked. And that was an interesting learning experience. I think crowdfunding is always great for a project that can’t get made any other way, like our adventure game that we crowdfunded. We couldn’t get any publisher to fund it, especially not for $3 million, you know? And [crowdfunding] allowed us to go directly to the fans and fund it that way. Now being part of Xbox, we can do something else that someone might never fund, but once it’s done and once we can prove it and make a demo of it, share it, people are like, oh, I get it now. I get it. And we have the funding to do R&D. So instead of having to go to crowdfunding and say “trust me, this is going to be great” — which we were able to do and that’s great — now we can actually make demos and prove to ourselves that we like the idea enough to make it.

Arthur Gies: Do you think that this new position allows you to compromise a little less as far as the kind of games that you have to make, or the shape or form that those games will take?

Tim Schafer: Yeah, in two ways. One is the small amount of money we might get for some ideas that would force a compromise. Now, that’s no problem. And the other one is chasing trends — we don’t really do that much at Double Fine. But we did [think], “we should try to do a free-to-play game” cause free-to-play was a big thing. We’ve made a free-to-play game. And if we were to try something, we want to do it for the right reasons; that we’re creatively interested in it, that we were inspired by it. That’s the right reason to do it. Not because the only things that [publishers/financiers] are signing this year are free-to-play games, you know? So we don’t have to be chasing any sort of crazy monetization trend. We just have to focus on our stories and our worlds and making them as good as possible.

Arthur Gies: Do you ever think about what Double Fine looks like if you were to retire or reduce your role at the company?

Tim Schafer: I don’t know. You know, Double Fine was founded so I could make Psychonauts, you know what I mean? So I don’t really think about retiring that much, especially after this acquisition. It’s very inspiring and makes me think about making games for a long time, because a lot of these ideas that I’ve been kind of pushing to the back of my head because I don’t think I can get them made, I feel like I could get those made now. So I’m sticking around.

Arthur Gies: Do you think any part of the decision to be acquired was motivated by what’s been happening to other game developers in the Bay Area, like Telltale?

Tim Schafer: Stuff like what happened to Telltale, has happened for the past 19 years all the time. That’s not a new phenomenon. And we’ve always managed to avoid those things, and maybe it was just luck or maybe it was being nimble and planning and those things. But we’re staying a certain size — we didn’t grow that much and that allowed us to survive, you know? So I don’t think the Telltale news was part of it, but it is unknown what’s going to happen in the future in terms of these new distribution models. The future is a little scary in that way for a studio of a certain size. It’s just a lot of work to survive, man. It’s a lot of hustle for me and Greg to go and get those deals and, and sign those things. And like I was saying, I’d rather put that time and energy into creative aspects of coffee company instead of the, you know, the money hunting.

Arthur Gies: Do you see this as an opportunity for Double Fine to get significantly larger or just to right size for the kind of games you want to make?

Tim Schafer:  I like the size we are. I think it’s always scary to grow really fast. I’ve seen companies do that really fast, speaking of Telltale directly, which had very fast growth. That’s, that’s not necessarily what you want to do. If you want to grow, you want to grow organically at a pace where it feels almost like you’re not growing. And I feel like we’re at a good size. We’re capable of making all the games we want to make. I think you could immediately think of like maybe five hires where we’re like, “oh, we need one of those, one of those.” And there’s things that we contract that we could not contract anymore. But I definitely don’t want to double or even half again our size right now.

Arthur Gies: What do you think the future holds for Double Fine? Have you considered the kinds of games that you can make with this new arrangement?

Tim Schafer: It’s a very exciting time because we’re going to finish Psychonauts 2 and do really well now that we have the funding we need to make sure we can finish it and do a great job with it. We have Rad coming out with Namco on August 20th. The creative director of that, Lee Petty, who made Headlander and Stacking. I’d love to see what he would do when he doesn’t have to worry about pitching and all that kind of stuff, and just focus on some really creative ideas. I have new ideas that I’ve been kind of squashing for years because I thought they’d be too hard to get funded. Then there’s also the stuff that we do called Amnesia Fortnight, which is our internal game jam where we test new creative directors and project leaders and let them put crazy ideas on the table and see who likes them and make small prototypes. We want to do one of those soon. And I think that will bring up new possibilities for different project leaders and different games.

Arthur Gies: There’s been a lot of talk over the last few months about the next generation of consoles, about what they could do, and their new hardware. Have you started to think about what Double Fine can do with new hardware, or is that not really so much a consideration right now?

Tim Schafer: I mean, you can see in our demo, we’re going for a really seamless experience, trying to flow from one area to another. And anything that helps us do that is great. Although I do have some ideas for loading screens that are fun too. So either way, I feel like whatever technology throws at us, we’ve always been a content-focused company, so we work with the strengths and limitations of whatever it is. You just do cool stuff.