Undead Labs Lays Off a ‘Significant’ Number of Staff the Same Day It Goes Independent From Xbox, but Says State of Decay 3 Isn’t Affected
Undead Labs, the studio behind the State of Decay series, announced on September 22 that it has become an independent, employee-owned studio, ending its long relationship with Xbox and Microsoft. The same announcement disclosed a “significant” round of layoffs, even as the studio insists State of Decay 3’s development and launch timeline aren’t changing.
Independent After More Than a Decade With Xbox
The original State of Decay launched in 2013 in partnership with Microsoft, and Microsoft acquired Undead Labs outright in 2018. Now the studio says it’s operating independently again, reportedly keeping its IP and back catalog along with runway funding from Microsoft, similar to the terms Compulsion Games and Double Fine Productions received when they spun off earlier this year. Studio head Philip Holt framed the split as a positive step, saying “independence brings us closer to our community and lets us focus on what matters most.”
State of Decay 3 is currently in alpha, with a closed beta planned before the end of the year.
A ‘Significant’ Round of Cuts the Same Day
In a separate statement announcing the layoffs, Undead Labs didn’t give a headcount, saying only that not everyone who helped build the studio “gets to make the rest of the journey with us.” Kotaku reported, citing an unnamed source, that as many as 40 developers may have been affected, though Undead Labs itself hasn’t confirmed an exact number.
State of Decay 3 Still Targeting 2027
Holt said the changes won’t affect State of Decay 3’s launch, with the game currently in alpha and working toward a closed beta before the end of 2026, ahead of a full 2027 release on Xbox, PC, and PlayStation with day-one inclusion in Game Pass. The news lands the same day Xbox’s own Chief Content Officer announced 268 more layoffs of its own across Halo Studios, Rare, and other teams, part of the same restructuring wave that began in July, though Undead Labs’ announcement was made separately by the studio itself rather than as part of that round.
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Picture Source: Undead Labs
