Undead Labs Becomes Independent Studio After Xbox Separation

Undead Labs has officially completed its separation from Xbox and is now operating as an independent, employee-owned game development studio.

The State of Decay developer announced the transition following Microsoft's latest round of organizational changes. A "significant number" of Undead Labs employees were made redundant as part of the separation process. The studio acknowledged the departing staff in a statement, saying: "They are exceptionally talented developers who have poured years into the State of Decay franchise: solving hard problems, looking after one another, and helping shape both this game and this studio. Their work remains part of Undead Labs and part of State of Decay 3, regardless of where their careers take them next."

State of Decay 3 development remains on track. The game is actively in development and scheduled to launch in 2027 on Xbox, Game Pass, PC, and PlayStation. Undead Labs plans to enter closed beta before the end of the year.

Studio Head Philip Holt commented on the change: "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. We're enormously grateful for our years as part of Xbox and for everything that relationship has made possible. Microsoft has been part of the State of Decay story from the very beginning, and we're proud of everything we've accomplished together."

Undead Labs was among several studios divested by Microsoft during earlier rounds of layoffs. Other studios that went independent include Compulsion Games and Double Fine Productions. The latest restructuring also saw Rare and the Halo franchise transferred to Activision, while Obsidian Entertainment became part of Bethesda. Playground Games and Turn 10 merged into a single studio.