State of Decay 3 Developer Transitions to Employee-Owned Model, No Longer Under Xbox Ownership

Undead Labs, the team behind the highly anticipated State of Decay 3, has officially announced its independence after more than ten years under Xbox’s umbrella. The studio has successfully completed its separation process and is now operating as an independent game development entity, all while continuing to work on State of Decay 3.

On September 22, Undead Labs confirmed that it had finalized its exit from Xbox. This move had been anticipated since July when Xbox revealed plans to lay off thousands of employees and allow some of its studios to go independent. Undead Labs was among those selected for this transition, and it is now a fully employee-owned studio.

“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,” stated Philip Holt, studio head at Undead Labs. “State of Decay exists because millions of players have made that choice over the years, and we’re dedicated to honoring their trust.”

The studio also reassured fans that development on State of Decay 3 is ongoing. Currently in alpha, the game is on track for a closed beta release before the year ends, with a target launch set for 2027 on PS5, Xbox, and PC. It will also be available on Game Pass.

Undead Labs first launched the original State of Decay in 2013 with support from Xbox, followed by State of Decay 2 in 2018, after which Xbox acquired the studio and integrated it into its Xbox Games Studio portfolio. Since then, the team has been focused on State of Decay 3, although reports have surfaced regarding employee burnout, harassment, and a toxic work environment, which may have impacted the game’s development timeline.

In other news, plans for another studio to transition to independence have not gone as smoothly. Xbox recently confirmed that two deals involving Hellblade developer Ninja Theory fell through, placing it alongside Arkane in discussions about potential closure. Meanwhile, studios like Double Fine and Compulsion Games have successfully made the leap back to indie status.