'State of Decay 3' Gets Encouraging Update as Studio Escapes Xbox Layoffs
Overview & Key Takeaways
Undead Labs is now fully independent from Microsoft and will release 'State of Decay 3' in 2027.
Things haven’t been going well at Xbox lately. In July, the company announced a massive wave of layoffs that would affect 1,600 employees immediately and another 1,600 over the next fiscal year. As part of the cuts, Xbox said it would divest from several of its renowned studios, including Double Fine, Ninja Theory, Compulsion Games, and Undead Labs.
If there’s a small silver lining, Undead Labs, the studio behind the open-world zombie survival series State of Decay, seems to have survived its breakup with Microsoft. The company announced that it has officially completed its separation and is now operating as an independent, employee-owned studio.
The team also confirmed it is still actively developing State of Decay 3, with the game currently in alpha. They’re aiming for a closed beta before the end of 2026, with a full release on Xbox, Game Pass, PC, and PlayStation in 2027 — while it’s a bit surprising that the game will still be on Game Pass given everything that just happened, it seems the relationship between these two companies hasn’t completely deteriorated. The press release says that this transition “marks a new chapter in a relationship between Undead Labs and Microsoft that spans more than 15 years.” Microsoft published the original State of Decay in 2013 and acquired Undead Labs in 2018.
“Independence brings us closer to our community and lets us focus on what matters most: making the best games we can and earning the continued support of the people who choose to spend their time with us,” said Philip Holt, studio head of Undead Labs. “State of Decay exists because millions of players have made that choice over the years, and we’re dedicated to honoring their trust.” The press release adds that future details about the studio will be announced in the future and that State of Decay 3 playtesting applications are still open.
What happened to the other studios that Microsoft divested from?
As for the other studios caught up in Xbox’s ongoing “major reset,” Double Fine and Compulsion Games both successfully separated from Microsoft last month, acquiring their IP, back catalogs, and runway funding. Ninja Theory, the studio behind games like Hellblade: Senua’s Sacrifice, DmC, Enslaved: Odyssey to the West, and more, is currently the odd one out. Microsoft said two separate acquisition deals fell through and that it is now beginning “consultation with employees on a proposed closure while continuing to explore other paths forward.” Xbox is also consulting to divest from Arkane Studios, the team behind Dishonored, Prey, and Deathloop.
Earlier today, Microsoft announced it will restructure most of its remaining studios, bringing Halo development under Activision, moving Obsidian under Bethesda, combining the Forza and Fable teams, and more.
