Undead Labs, the studio behind the State of Decay series, has announced it is now an independent and worker-owned entity, following Xbox's recent restructuring efforts. This transition, however, has come at the cost of significant layoffs.
In a statement on its website, Undead Labs expressed that independence will allow the studio to focus more closely on its community and game development. "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 studio head Philip Holt.
Despite the positive outlook on independence, the studio also confirmed on LinkedIn that "a significant number" of staff would be departing. "Unfortunately, today we are also saying goodbye to a significant number of our colleagues. It's difficult to reach this moment knowing that not everyone who helped get us here gets to make the rest of the journey with us," the statement read. The studio acknowledged the difficult climate within the industry, noting, "There have been far too many announcements like this across the industry, and we hate adding to that list. These are people we'd hire again in a heartbeat, and we hope the industry takes notice."
Undead Labs was among the studios Microsoft indicated it would be parting with as part of its summer restructuring. While Microsoft had previously stated a buyer had been found, the studio's name was not disclosed at the time. A similar situation occurred with Ninja Theory, which may face closure after potential deals fell through.
Development on State of Decay 3 continues, with the studio aiming for a closed beta before the end of the year and a 2027 release target. The game will remain available on Game Pass. Xbox Studios boss Matt Booty confirmed in a message to staff that State of Decay 3 will have a new publisher, though this publisher has not yet been named. The game is also in development for PC and PlayStation in addition to Xbox.
The separation marks the end of a 15-year partnership between Undead Labs and Xbox. Xbox originally published the first State of Decay in 2013, acquiring the studio in 2018 shortly after the release of its sequel, State of Decay 2.