Undead Labs, the studio behind State of Decay, has confirmed that it underwent “significant” layoffs following its independence from Xbox. The news comes as part of Microsoft’s broader reset for the Xbox brand, which was made public earlier this summer.
The studio posted an announcement on LinkedIn, confirming that it is parting ways with a “significant” number of staff. “Unfortunately, today we are also saying goodbye to a significant number of our colleagues,” reads the studio’s statement. “It’s difficult to reach this moment knowing that not everyone who helped get us here gets to make the rest of the journey with us.”
“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.”
The Layoff Announcement and the Microsoft Reset
The announcement on LinkedIn is direct about the scale of the cuts. The studio does not specify the number of staff affected, but the language — “significant” — suggests a material reduction in its workforce. The statement also notes that the separation from Xbox comes as part of Microsoft’s big reset for the brand.
“Unfortunately, today we are also saying goodbye to a significant number of our colleagues.”
The timing of the announcement ties to Microsoft’s recent moves around Xbox. Earlier this summer, Microsoft made public its plans for the brand’s reset.
Undead Labs’ Independence From Xbox
Undead Labs became independent after separating from Xbox. The studio’s statement does not provide details on the timing of the split or the terms of the separation.
The statement also reflects on the broader shift in the Xbox ecosystem. Most of the Xbox teams that were at risk of being shut down managed to go independent, according to reports. But not all teams were able to find new homes.
Ninja Theory is one notable exception. That studio is facing closure after negotiations fell through with different buyers. The situation at Undead Labs differs from that outcome, with the studio preserving its identity and its development work.
How the Layoffs Affect State of Decay 3
The question on everyone’s mind is whether the layoffs will impact the release of State of Decay 3. Undead Labs has addressed that directly, and the answer is reassuring.
“State of Decay 3 remains in active development, and these changes will not impact the game’s launch,” said Philip Holt, Studio Head of Undead Labs, in a statement to IGN. “The team is continuing its work on schedule, and we remain committed to delivering the experience our community has been waiting for. We’re grateful to everyone who has contributed to the game.”
The statement also reinforces the studio’s commitment to the project. Holt stressed that the team is still working on schedule, and that the game’s launch is not in jeopardy.
The 2027 Release Date Holds
State of Decay 3 remains in development with a 2027 release date. The studio has expressed enthusiasm over its future as an independent studio.
“We’re dedicated to honoring their trust,” Holt said, referring to the millions of players who have supported the franchise over the years.
The 2027 release date is a significant commitment for a studio that has just undergone significant staff reductions. The statement’s emphasis on schedule suggests that the development team is on track to meet that deadline.
Independence Brings the Studio Closer to Its Community
The studio’s separation from Xbox is not just a business move. It is also a philosophical one. The studio’s statement frames independence as a way to strengthen its relationship with the players who matter most.
“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,” said Holt. “State of Decay exists because millions of players have made that choice over the years, and we’re dedicated to honoring their trust.”
The statement makes clear that the studio sees independence as a path to greater creative freedom and a stronger connection with its audience. By moving away from the corporate structure of Xbox, Undead Labs can operate more directly with the players who have supported the franchise.
What Happens Next
The studio has not provided details on whether other companies considered buying Undead Labs. It wouldn’t be surprising if such conversations took place, given the precedent set by other Xbox teams that went independent.
The situation at Undead Labs is now settled. The studio is independent, the game is still on track for 2027, and the layoffs are complete.
The coming months will be telling. The studio will need to show that it can deliver on its promises without the resources of a major corporate backer. The 2027 release date is a heavy anchor, and missing it would be a blow to the franchise’s reputation.
For now, the studio is focused on the work ahead. The statement’s commitment to the community is genuine, and the game’s development is continuing on schedule.
Key Facts Box
- Studio: Undead Labs
- Game: State of Decay 3
- Layoffs: “Significant” number of staff confirmed
- Separation: Part of Microsoft’s Xbox brand reset
- Release date: 2027
- Studio statement: Development is continuing on schedule
The layoffs are a difficult moment for the studio. The statement’s recognition of the departing staff is sincere, and the studio is doing what it can to honour the work of everyone involved.
The future of State of Decay 3 is now in the hands of an independent studio with a clear vision. The 2027 release date remains the goal, and the studio is committed to delivering on it. That is the promise the statement makes, and it will be tested over the coming months.
Source material: “State of Decay Developer Undead Labs Responds to 'Significant' Layoffs Following Independence from Xbox,” IGN.
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