Undead Labs may be next in Xbox’s studio shake-up. The Seattle-based studio behind the State of Decay series is reportedly negotiating a buyout with Xbox leadership; if that falls through, around 110 employees could lose their jobs, putting State of Decay 3 in limbo just as it had finally started moving toward release.
That would be a nasty turn for a studio Microsoft bought in 2018 and then kept on a very long leash. In eight years under Microsoft ownership, Undead Labs has not shipped a new game, which makes the pressure around the next State of Decay feel less like surprise and more like corporate arithmetic.
State of Decay 3 release plans
State of Decay 3 was announced six years ago and is now said to be aiming for a 2027 launch on PC, Xbox Series X and S, and PS5, with Game Pass in the mix as well. That multiplatform list is a reminder of how much Xbox strategy has shifted: the company is increasingly willing to put its biggest names where the players are, even if the hardware team has to wince a little.
- Studio: Undead Labs
- Known for: State of Decay franchise
- Reported headcount at risk: about 110 people
- Target platforms for State of Decay 3: PC, PS5, Xbox Series X and S
- Subscription release: Game Pass
Other Xbox studios are already in the frame
Undead Labs is not being singled out in a vacuum. GamesBeat has reported that Compulsion Games, Double Fine Productions, and Ninja Theory are also dealing with similar uncertainty, while the cuts are expected to reach Blizzard Entertainment and Bethesda Softworks too. If that plays out, this won’t be a tidy reset; it will be the biggest wave of layoffs in the platform holder’s history.
The timing is hard to ignore. Xbox cut Game Pass pricing in April, backed away from launching new Call of Duty titles into the subscription on day one, and then raised Xbox Series X and S console prices by $100 to $150 just last week. That is not the sort of sequence that suggests calm management. It looks more like a company trying to find its footing while trimming weight in all directions.
What happens if the buyout fails
If no buyer steps in, Undead Labs could simply become another casualty of a broader Xbox consolidation. The sad part is that State of Decay 3 is one of the few projects in this mess with an obvious commercial lane: zombies, survival, and a long-running fan base are easier to sell than corporate restructuring speeches. The open question is whether Xbox wants to keep funding that lane itself, or is happy to let someone else drive.