State of Decay developer Undead Labs has separated from Xbox to become an independent studio, confirming significant layoffs alongside the structural shift, according to reports by IGN, The Verge, and Bloody Disgusting. The studio’s upcoming survival title, State of Decay 3, remains in development and is currently in alpha, with a projected 2027 release window.
Xbox Structural Changes and Studio Independence
According to reporting from Insider Gaming, Xbox CEO Asha Sharma confirmed that Undead Labs entered terms to join new ownership with funding to complete and grow its projects. The separation places Undead Labs alongside other studios shifting away from direct Microsoft oversight, including Compulsion Games and Double Fine Productions transitioning to independent status while retaining their respective intellectual properties. Microsoft has slimmed its gaming division amid broader market challenges, leading to structural reductions across multiple first-party teams.
State of Decay 3 Development Status
Despite the operational changes and ownership shift, State of Decay 3 remains on track for its anticipated 2027 release, as reported by Bloody Disgusting. The title is currently in the alpha stage of development. According to Push Square, a closed beta test for the game is scheduled to take place before the end of 2026, though specific platform availability and milestone dates remain subject to the studio’s updated independent production schedule.
Studio Layoffs and Operational Impact
The transition to independence coincided with widespread job reductions at the Seattle-based developer. In a LinkedIn post cited by Push Square, Undead Labs stated that it said goodbye to a significant number of colleagues, noting the difficulty of reaching a milestone where not everyone who contributed to the studio’s history could continue on the remaining journey. Studio head Philip Holt acknowledged the studio’s long-standing partnership with Microsoft, which began in 2011 before the studio became part of Microsoft’s gaming division in 2018, emphasizing that the move to independence is intended to draw the team closer to its community.
Frequently Asked Questions
- Is State of Decay 3 still releasing? Yes, according to Bloody Disgusting and Push Square, the game remains in development, is currently in alpha, and targets a 2027 release.
- Who owns Undead Labs now? According to Insider Gaming, the studio entered terms for new ownership and independent funding after splitting from Xbox.
- When was Undead Labs originally acquired by Microsoft? Microsoft first partnered with the studio in 2011 before Undead Labs became part of Microsoft’s gaming division in 2018, as reported by Push Square.
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