Undead Labs: Eight Years with Xbox Without a Game Release

The latest chapter for Xbox kicked off on June 10, 2018, when then-CEO Phil Spencer took the stage at E3 to announce the acquisition of four studios: Ninja Theory, Playground Games, Compulsion Games, and Undead Labs. This was a pivotal moment, signaling Microsoft’s renewed commitment to first-party game development after a period of stepping back. Looking back, it marked the beginning of a significant acquisition wave that would eventually include Bethesda and Activision Blizzard.

Just months prior to this announcement, Undead Labs had launched State of Decay 2. Fast forward a little over eight years, and Microsoft revealed that Undead Labs would be moving on to new ownership. The studio has yet to deliver State of Decay 3 and hasn’t released any other titles during its time under Microsoft’s banner.

The outcomes for the other three studios have been varied. Compulsion Games and Ninja Theory are also parting ways with Xbox; Compulsion is returning to independence through a management buyout, while Ninja Theory, like Undead Labs, has an undisclosed buyer. Compulsion managed to release one game under Xbox, the 2025 title South of Midnight. Ninja Theory produced two: the 2020 multiplayer game Bleeding Edge, which lasted less than a year, and Senua’s Saga: Hellblade 2, set for 2024. Playground Games has had a more successful run, releasing three well-received Forza Horizon titles and has Fable in development, which Microsoft is keen to keep.

Additionally, Xbox is parting ways with Double Fine, which released three games during its time with Xbox, and likely Arkane Lyon from the Bethesda group, which has one game to its name. This trend isn’t solely about productivity, as Obsidian Entertainment and inXile Entertainment, both acquired later in 2018, remain with Xbox. Obsidian has launched five titles under Xbox Game Studios, while inXile has yet to release anything, though it’s currently developing Clockwork Revolution. (Wasteland 3 was published by another company in 2020.) Microsoft seems to see potential in both studios, possibly due to their ability to contribute to the Fallout franchise.

Undead Labs’ situation is particularly noteworthy. The State of Decay series has garnered a solid fanbase, and State of Decay 3 appears to be an ambitious project, but did anyone anticipate it would take seven years to develop? Reports suggest there has been dysfunction within the studio, which reflects a broader trend in the industry where development timelines are stretching. However, it’s also worth considering potential issues within Xbox itself, which has struggled to effectively manage its studios, aside from a few exceptions like Mojang and Minecraft. The company often seems to lack a clear grasp on the projects its various studios are working on.

Now, with fewer studios to oversee, the responsibility falls to chief content officer Matt Booty, just as it has since 2018. He remains the one constant in this tumultuous narrative, even as many Xbox employees face job losses. It’s a puzzling situation.

In hindsight, Xbox may have been better off without acquiring the studios it continues to close.