State of Decay 3 Studio Is Now Independent and Employee-Owned

Undead Labs, the developer of State of Decay 3, has completed its separation from Xbox after more than a decade under the company’s ownership. The studio is now independent and employee-owned, while development of its next zombie-survival game continues.

Undead Labs confirmed the completed transition on 22 September. The move follows Xbox’s July announcement that it would cut thousands of jobs and allow some studios to become independent. Undead Labs was among the teams selected for that process.

The announcement is a significant change for a developer whose history has been closely linked with Xbox. Undead Labs released the first State of Decay in 2013 with Xbox’s support. The studio followed with State of Decay 2 in 2018, after which Xbox acquired the developer and brought it into its Xbox Game Studios portfolio.

State of Decay 3 remains in development

Undead Labs says State of Decay 3 is currently in alpha. The team is still working towards a previously announced closed beta planned for before the end of 2026, with the game continuing to target a 2027 release.

The title remains planned for PlayStation 5, Xbox and PC, and will still be available through Game Pass. Its development has taken place amid reported allegations from employees involving burnout, harassment and a toxic workplace, issues that were said to have contributed to the project’s lengthy production.

“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 studio head Philip Holt.

“State of Decay exists because millions of players have made that choice over the years, and we’re dedicated to honoring their trust.”

A wider shift for Xbox studios

Undead Labs is not the only developer affected by Xbox’s changing studio strategy. Double Fine and Compulsion Games have already returned to independent operation, while Arkane and Ninja Theory face more uncertainty.

Xbox confirmed on Tuesday that two proposed deals intended to help Ninja Theory become fully independent had collapsed. The developer behind Hellblade is now reportedly in consultation over a potential closure, alongside Arkane.

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