Undead Labs, the studio behind the upcoming State of Decay 3, announced the game in 2020 as a strategic move to maintain visibility with Microsoft during a period of significant acquisitions by the company. This proactive announcement helped keep the studio and its flagship project on Microsoft's radar amid a spree that included major acquisitions like Bethesda and Activision Blizzard.
Studio boss Philip Holt explained that the early reveal was a contingency, designed to prevent Undead Labs from being overlooked or potentially divested before its vision for State of Decay 3 could be presented. "I was a little worried about getting swallowed up or divested before we had a chance to present to the world what we were working on," Holt stated in an interview with The Game Business. "So, it was a bit of a marker on the table. I was saying, State of Decay 3, we're announcing it, the audience knows it's in development, and here's a trailer to demonstrate our vision."
The developer has now transitioned to an independent, employee-owned studio, a move Holt described as a mutual agreement with Microsoft. He indicated that the process was facilitated by the studio being close to revenue generation, allowing them to seek capital for completion independently. "It was an accelerated period of time for Microsoft's divestiture," Holt said. "We had a lot of interest. I also thought that because we were so close to being in revenue, the amount of capital that we needed to finish [State of Decay 3] was not an insurmountable amount that we couldn't go raise it ourselves. I knew other studios were doing management buyouts, so I submitted an offer for a management-led acquisition, and Microsoft thought that would be a good idea."
Despite the studio's departure from the Xbox Game Studios umbrella, State of Decay 3 is still slated to launch day-one on Game Pass. Holt credited the subscription service with significantly boosting the franchise's reach, noting that it has helped State of Decay attract over 25 million players. The shift to independence, Holt believes, allows Undead Labs to better focus on its audience and financial sustainability. "We need to make a profit, we need to be sustainable, we need to pay ourselves and our partners--and it is a goal. This is not a charity. But it's not the number-one most important objective."
Undead Labs joins a list of former Xbox studios, including Double Fine and Compulsion Games, that have become independent. The news comes as other former Xbox studios face uncertain futures, with reports suggesting Ninja Theory may be shut down following failed acquisition talks.