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The Insane Development of Psychonauts

Behind the scenes on the making of Double Fine's iconic, mind-bending adventure

Rory Norris

Feb 18, 2022 • 9 min read

Making a game is hard work but the story of Psychonauts’ creation is one-of-a-kind filled with stories of crazy neighbours, intense crunch, and flooding toilets. But it’s also one about the birth of Double Fine Productions, a small team of hopeful developers wanting to get their vision out into the world.

It’s been sixteen years since the insane world of the original Psychonauts. The announcement of a sequel after over a decade sparked my interest and I began delving into the development of this 2005 cult-classic. That’s when I uncovered the most bizarre and challenging game development story I think I have ever heard, one which threatened the very survival of Double Fine Productions before it’s inaugural release all those years ago. How the original Psychonauts ever reached store shelves and into player’s hand is beyond incredible. This is the story of Double Fine Productions and the iconic Psychonauts.

This story begins as all development stories do, with creative minds and an idea. Psychonauts originated from the mind of Tim Schafer during the production of Full Throttle. Schafer envisioned a sequence in which the protagonist would endure a psychedelic experience brought on by a peyote plant. This idea was rejected from Full Throttle by publisher LucasArts on the grounds that it wasn’t family friendly. But Schafer kept this initial idea and developed it in his own time, conjuring up the mental world that would be Psychonauts.

From here, Schafer left LucasArts to form his own studio, Double Fine Productions, in 2000, where he would go on to make this vision a reality when development on Psychonauts began in 2001.

Before development could truly begin, Double Fine would need a workspace. This proved a daunting task in 2001 with the ‘Dot-Com Boom’, a stock market bubble caused by the over-speculation of internet-related companies which drove up prices. The only workspace the team could afford in San Francisco was a warehouse on Clara Street, which Executive Producer Caroline Esmurdoc described as having a “rough and ready start-up vibe”. At first it didn’t seem so bad; the team had so much space that they could park their cars next to their desks. Yet as time went on its flaws started to show.

The neighbourhood surrounding their office was rough, with cars frequently being broken into. Esmurdoc recalled a situation with there being a dead body in a doorway across the street one day, a victim of an overdose. On another occasion, a woman from the hotel next door to their office leapt out of her window and landed on the roof, breaking her leg and their office ceiling in the process. Events like this weren’t infrequent during their stay at the Clara Street warehouse.

Yet the problems didn’t end once you stepped foot in the office. The electricity was unreliable which is particularly problematic for a videogame developer. Inside it was cold and the team could not use heaters as they would often blow the circuit breakers. Rats took up residence around the building, and on rainy days the sewers under the office would flood, leaking sewage from the toilets all through the building. Much like the sewage, these problems rose, delaying production on a project that was already struggling with deadlines. These humble beginnings in a San Francisco warehouse became “depressing, disgusting, and dangerous.”

With frequent crime, a rising rat problem, and the sewage situation, there’s no wonder that the studio wanted to move as soon as they could. Thankfully, following the fall of the Dot-Com Bubble by late 2002, Double Fine were able to move. By July 2003, the team had moved into a much more comfortable and accommodating climate-controlled space without the fear of power outages and sewer tsunamis.

Sadly, a change in workspace didn’t put an end to the setbacks. Being a new studio there were extensive growing pains that hindered development. The game’s code was quickly becoming unmanageable for the small team. Sometimes, it bogged down level designers for entire days as they worked to untangle the code. Eventually, eight gameplay programmers were hired to completely rewrite parts of code.

The ever-increasing scope of the game strained resources and made testing iterations a challenge, albeit a vital one to avoid breaking existing code. Furthermore, prior to the publishing deal with Majesco Entertainment in 2004, Double Fine could not afford to hire a testing department to assist with this. Although this did lead to a heart-warming moment when Double Fine put out a call for volunteers, with friends and strangers answering the call to test the game. Once Double Fine teamed up with Majesco, one of the first decisions made was to hire a full-time test department.

Perhaps the largest growing pain Double Fine endured during the production of Psychonauts was who actually owned the levels.

“Since no one wanted to compromise gameplay or visuals, we developed a level-sharing system. A level designer would design the world, lay down action paths, and script game events, and an artist would build additional world mesh around that design. This process failed miserably.”

Caroline Esmurdoc, Executive Producer for Psychonauts

Work would be overwritten since both level designers and artists used the same software, leaving levels in an unplayable state. There would be resentment among level designers following the decision that only artists would create visual geometry. As the scope of the project grew ever larger, so too did Tim Schafer’s responsibilities. His corporate responsibilities often demanded his time, leaving no one to handle these disputes between the team. Without his guidance, level designers would produce concepts that would be rejected by Schafer, overtime developing a rift and a breakdown of communications.

On top of this, Double Fine also ran into problems with Microsoft over their publishing deal. Psychonauts was initially to be published by Microsoft as an exclusive title for the Xbox when development began in 2001. However, this wouldn’t come to be. There were disagreements over some of Double Fine’s gameplay decisions and requests made by Microsoft to include more instructional information for the player. Double Fine were adamant to stick to their creative vision, not giving into the demands made by Microsoft, perhaps most of all the suggestion to make humour secondary to the story which would require significant reworking. Pressure was also mounting on the newly-founded studio to meet strict deadlines. Esmurdoc described one occasion in which the studio only learned of the requirements of a milestone after they had already submitted content, causing issues for approval and receiving funding.

By 2003, prior to the office move, Psychonauts was at risk of cancellation by Microsoft could they not develop a build of the game that demonstrated its ‘fun factor’. Double Fine were determined and with new management (including Esmurdoc) and a renewed focus, the studio went on to create the iconic Black Velvetopia level.

This was well received by Microsoft and saved the game from the brink of cancellation. But it would only be a year later, in 2004, when the team would face this harsh reality yet again. With the departure of Ed Fries from Microsoft, who was the initial push behind the publishing agreement, Microsoft pulled support from the project, with Microsoft management describing Double Fine as ‘expensive and late’. This came at a time when the studio thought they were finally reaching peak productivity.

Double Fine then endured a period without the security of a publisher. Demoralised but not broken, the team continued to work on the game as they searched to secure funding.

“It took all of our savings, careful money management, and a little help from our friends to survive the cancellation. We continued to work hard on milestone builds, though we had no publisher to submit them to. Tim and I focused on securing new funding.”

Caroline Esmurdoc, Executive Producer for Psychonauts

The team had to prepare for the worst, being completely honest about the situation they were up against. In the face of this threat, Double Fine continued to work on the game, holding out hope that a publisher could be found before it was too late. In an interview with GameSpot in 2004, Schafer recounted this period as being stressful but “awesome in a way” as it allowed them to focus solely on the game, “without any outside distractions”.

“Games are like that little daisy in Horton Hears a Who! You know, how Horton puts his ear really close to the daisy and hears a tiny voice inside? That’s what games are like. You need it to be nice and quiet sometimes so you can hear the game talking to you. Sometimes the game says, “I need more combat” or “There are too many inventory objects.” And that’s the voice you can trust — the one that comes from the game. Of course, it’s still better to have a publisher, and ideally you have a good relationship with them where you can both listen to the daisy together. Aw, that’s sweet.”

Tim Schafer, Double Fine Entertainment Founder

Their determination paid off. By August 2004, Double Fine had negotiated a publishing deal with Majesco Entertainment. This allowed them to continue development and go on to eventually publish the game on Xbox and Windows PC in 2005. As part of the terms, however, Double Fine had to forgo the hiring of new staff as planned but without the benefit of scaling back the design. These two factors coalesced into heavy crunch time for the developers who had already poured heart and soul into the project. The team worked tirelessly, “beyond what was reasonable and humane”, to get the game into a good state. Double Fine’s team and resources were stretched further still when Majesco announced a PlayStation 2 port of Psychonauts to be developed by Budcat Creations in October 2004.

Four and a half years in the making, Psychonauts was finished when it went ‘gold’ in March of 2005. It released shortly after on the 19th April 2005 for Windows and Xbox, and June 22nd 2005 for the PlayStation 2. The team had overcome the crazy workspace, the impossible deadlines, the internal struggles, and navigated the treacherous realm of publishing deals.

“We had managed to dodge a hundred bullets without compromising the quality of the game, losing ownership of the company, or missing a single day of payroll. Through a series of setbacks and disappointments that would have decimated other groups, the Double Fine crew displayed an unshakable spirit, resulting in the creation of one of the most cohesive teams I’ve ever seen.”

Caroline Esmurdoc, Executive Producer for Psychonauts

Upon release it was well-recieved with critics praising its unique and quirky world and comedic writing. But even with this monumental task complete, Psychonauts and Double Fine were in trouble. Majesco projected a strong financial quarter after Psychonauts’ release but quickly readjusted their fiscal year projections to a staggering degree. What was predicted to be $18 million in profit became $18 million in losses. CEO Carl Yankowski announced his immediate resignation following this news. By the end of 2005, Psychonauts had shipped only 100,000 copies in North America. Even by March 2012 the game had only sold just 400,000 copies. Psychonauts was a financial failure.

Thankfully, there is a turn in this story. In June 2011 the publishing deal made with Majesco Entertainment had expired, meaning full publication rights reverted back to Double Fine. From here they could launch the game on more digital storefronts and platforms, and it worked. Since Double Fine’s acquisition the company was able to make more sales than they had achieved in the whole period prior. At the end of 2015, Psychonauts had sold nearly 1.7 million copies, with more than 1.2 million occurring after Double Fine’s acquisition of the rights.

It was a long road full of setbacks but finally, Double Fine’s Psychonauts had succeeded almost 10 years after its release, now establishing itself as a cult-classic in gaming. It’s amazing that Psychonauts ever actually made it into players hands, overcoming terrible working conditions, risk of cancelation on multiple occasions, and a newly-formed studio struggling to keep up with the ever-increasing vision for the game. This trial-by-fire during Psychonauts forged Double Fine into who they are today.

In 2021, it’s just over two decades since the birth of Double Fine Productions and Psychonauts. The studio has gone through lots of change and development over the years but one thing has always remained the same —their hard-work and dedication to creativity is unwavering. This precedent continues with Double Fine’s latest project, Psychonauts 2, set to release 25th August 2021 after receiving nearly $4 million by 2016 through a crowd-funding platform called Fig. After 15 long years Double Fine finally have the opportunity to revisit the insane world of Psychonauts that began their journey, only now with more experience and new technology to do it justice.

The Insane Development of Psychonauts

Rory Norris

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