Undead Labs, the studio behind the State of Decay series, has confirmed that layoffs following its departure from Xbox ownership have necessitated changes to the development of State of Decay 3. Studio boss Phillip Holt stated that the studio has had to "make some changes" to the upcoming zombie survival game due to a significant number of employees leaving the company.
Holt discussed the situation in an interview with The Game Business, explaining that while the core scope of State of Decay 3 remains largely intact, adjustments are unavoidable. The game is currently in alpha, with a closed group of players testing it. "I think our alpha players can attest to that," Holt said regarding the game's substantial content. "And obviously, with a significant number of people leaving the company, we've got to make some changes."
State of Decay 3 is slated for a 2027 release, a date announced this past summer. The game was initially revealed in 2020, leading to speculation about its development progress during long periods of silence. Holt clarified that while the game has been in a small-team development phase since around 2020, substantial development did not ramp up until 2022 or 2023. He indicated that the eight-year period since State of Decay 2 shipped, or the time since the first trailer featuring a zombie deer, is a more accurate measure of the game's long gestation.
The early announcement of State of Decay 3 in 2020 was a strategic move by Undead Labs. Holt expressed concern that Microsoft's aggressive acquisition strategy at the time might lead to the studio being "swallowed up or divested" before they could properly showcase their work. Announcing the game served as a marker, signaling to the audience that State of Decay 3 was in development and demonstrating the studio's vision.
Undead Labs' restructuring occurred this summer as part of Xbox's broader corporate changes. While initially slated to join new ownership, the deal ultimately did not materialize. Instead, Undead Labs pursued and successfully completed a management buyout, regaining its independence. Holt described the departure of colleagues as "total heartbreak," and declined to provide specific numbers regarding the layoffs, emphasizing the personal impact on those affected.
Despite these changes, Holt assured that the studio possesses all necessary resources to complete State of Decay 3. He highlighted that operating independently provides a clearer focus, with the sole objective of creating the best possible game for the audience, free from the multiple directives inherent in a larger corporate structure. "I don't have a boss. The success or failure of the company is down to whether we create something an audience will support,” he stated.
State of Decay 3 will still launch day one on Xbox Game Pass. Holt acknowledged the vital role Xbox's subscription service has played in the series' success, which has reached an estimated 25 million players over its lifetime. He noted the continued influx of players to the franchise, even today, through Game Pass.
Earlier impressions of State of Decay 3 suggest the game is progressing well, with plans for more detailed coverage to follow.