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Undead Labs has completed its separation from Xbox and says it is now an independent, employee-owned studio. The move does not mean State of Decay 3 has been canceled: the game remains in development, with a 2027 release target. But Studio Head Philip Holt says the studio’s financial priorities have changed—from building a potential Xbox tentpole with first-party backing to making sure an independent company can survive through launch and sustain itself with the revenue it earns.
What changed when Undead Labs left Xbox?
Undead Labs says it has completed its separation from Xbox and now operates as an independent, employee-owned studio. Microsoft acquired the studio in 2018, after a relationship that began before the original State of Decay launched in 2013, according to the studio’s independence announcement.
| # | Preview | Product | Price | |
|---|---|---|---|---|
| 1 |
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State of Decay 2 - Ultimate Edition - Xbox One | $100.16 | Buy on Amazon |
| 2 |
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State of Decay- Year-One Survival Edition | $35.99 | Buy on Amazon |
| 3 |
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Desperados 3 - Xbox One | $15.00 | Buy on Amazon |
| 4 |
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No More Heroes 3 – Day 1 Edition - Xbox Series X | $21.79 | Buy on Amazon |
In an interview with The Game Business, Holt said Microsoft’s divestiture process accelerated. He submitted an offer for a management-led acquisition, believing he could secure the capital needed to complete State of Decay 3. He said the selected financing came through a publisher relationship, rather than outside investors; the publisher and deal terms have not been disclosed.
Holt said the funding challenge involved both the cost of the team and how quickly decisions could be made. He also pointed to Seattle’s high labor costs, while arguing that the studio should compete by entertaining an audience—not by driving labor costs as low as possible.
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- State of Decay 2 Ultimate Edition includes early access to the full game, a code for the original State of Decay: Year One Survival Edition on console, and a code for two add-on content packs: Independence Pack and Daybreak Pack
- Build your community and invite up to three friends to explore an open world filled with hostile zombies Four Player Co-Op Multiplayer Establish a base, develop your characters and manage resources to survive in a post-apocalyptic world
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Why has the business calculus shifted?
As part of Xbox, State of Decay could be treated as a long-term first-party investment with the ambition to become a tentpole franchise. Holt said the idea was that, with proper support, it could rise alongside Xbox’s biggest brands. As an independent company, Undead Labs must instead maintain a cost structure that can carry the studio through launch and be supported by the revenue the game and business generate.
That is a change in how the studio must fund and sustain its work, not evidence that it has abandoned its ambition for the series. Holt described the independent studio’s focus as entertaining an audience and scaling the business to the size of that demand. He also said independence gives Undead Labs a “cleaner, clearer line of sight to the audience,” while acknowledging that making the best possible game was a priority at Xbox, too.
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What does employee-owned mean here?
Holt said all Full Measure shareholders are Undead Labs employees and that the company was in the process of issuing stock options to all staff. He did not give final ownership percentages or a complete allocation, so the available information does not establish how much of the company any individual employee owns.
How have staffing changes affected State of Decay 3?
Holt said a significant number of people left the studio and that the team made changes to State of Decay 3 as a result. He said those changes did not require a radical rescope. He declined to provide a departure or layoff total, saying he did not want to reduce the impact on friends and colleagues to a statistic.
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- Command up to five desperados and use their lethal skills to stealthily thin out the enemy rows
- Approach each mission with a variety of different solutions and paths
- Resolve seemingly impossible large enemy setups with careful planning and perfectly timed execution of the team's special skills
- Witness the glory of classic Wild West scenarios like frontier towns, desert canyons, Mississippi swamps, sprawling modern cities and many more by day and night
- Defeat your foes choosing between deadly and non-lethal options, stealth and blazing guns and further adjust the game to your playstyle
Undead Labs is working with co-development teams Virtuos, Wushu, and Blind Squirrel on the game, Holt told The Game Business. During the studio’s eight years as an Xbox studio, it released 38 updates for State of Decay 2, he said—a record of ongoing support for that game, rather than a claim that the studio released a new game during that period.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What is the current State of Decay 3 release plan?
Undead Labs said the game was in alpha and that the team was working toward a closed beta before the end of 2026. The studio set a 2027 release target for Xbox, Game Pass, PC, and PlayStation in its announcement. Xbox Wire also described 2027 as the target in its June 7, 2026 gameplay feature. These are public targets, not a guaranteed launch date.
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What kind of game is State of Decay 3?
In the June 2026 Xbox Wire feature, Creative Director Kevin Patzelt described State of Decay 3 as a survival sandbox with solo play and shared-world co-op for up to four players. Planned systems include survivor communities, settlements, scavenging, crafting, and dynamic Plague Nests. Patzelt said the playable space is about four times the size of a single State of Decay 2 map; that is his comparison, not an independently measured map-size figure.
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Product prices and availability are accurate as of the date/time indicated and are subject to change. Any price and availability information displayed on Amazon at the time of purchase will apply.
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