State of Decay 3 studio Undead Labs leaves Xbox
The State of Decay studio has completed its separation from Microsoft and now owns itself, with the next game in alpha and a closed beta still promised for this year.
State of Decay’s studio is no longer part of Xbox. Undead Labs said today that it has completed its separation from Microsoft and is now operating as an independent, employee-owned game development studio, with State of Decay 3 still in active development.
The game is currently in alpha, and the team says it is still working towards the closed beta it previously announced for later this year. State of Decay 3 remains targeted for a 2027 release on Xbox, PC, PlayStation and Game Pass, and the studio says further detail on its plans will be shared at a later date.
What the studio said
Philip Holt, studio head at Undead Labs, put the audience rather than the business case at the centre of the announcement. “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,” he said, adding that the studio is dedicated to honouring the trust of the millions of players who have kept State of Decay alive over the years.
Holt also thanked Microsoft for what the two sides built together, a relationship he described as part of the State of Decay story from the very beginning.
Fifteen years with Microsoft
That relationship is an old one. The original State of Decay launched in partnership with Microsoft in 2013, and Microsoft bought the studio outright in 2018 and folded it into its first-party portfolio. The two State of Decay games that followed have sold in numbers large enough that calling the series niche was always a stretch, and the third has been in the works since before the purchase.
Undead Labs is not the only studio to leave the Xbox organisation this year. Compulsion Games and Double Fine returned to management with their back catalogues and runway funding in August, and Xbox published its own account of the wider restructuring today, which also sets out the next Halo game moving under Activision, Playground and Turn 10 merging into one Forza and Fable team, and a proposed closure at Hellblade developer Ninja Theory. The difference here is ownership: Undead Labs now holds itself.
Players who want an early look can still sign up for playtesting at playtest.stateofdecay.com, and the studio says updates will continue to come through its own site and social channels.
Our opinion
Employee ownership is a much better answer to consolidation than a management buyout or a private-equity roll-up, because it makes the people who actually make the games the people who have to live with the consequences of the schedule. It is not a guarantee of anything — an employee-owned studio still has to sell games, and the studio that made two State of Decay titles in thirteen years has a lot of its future resting on one alpha build. But it does change who gets asked whether the deadline is real, and that question is the one mid-sized teams usually lose.
The more interesting sentence in the announcement is the quiet one about the closed beta. A studio that has just bought itself out of a platform holder is still promising the same player-facing milestones on roughly the same timetable, which suggests the commercial shock of going independent is smaller than the doom around mid-budget teams implies. It also means State of Decay 3 is now the whole pitch: there is no parent company’s balance sheet left to blame, and no first-party patience left to spend.