Undead Labs’ new chapter as an independent studio will have consequences for the development of State of Decay 3. After leaving the Xbox organization and reducing its workforce, the developer acknowledged that some changes will need to be made to the project, although it says the game’s planned content and overall scope will not be drastically scaled back. Currently in alpha, the title is still expected to launch sometime in 2027.

Forcing big changes

In an interview with The Game Business, studio head Phillip Holt said that State of Decay 3 is relatively close to completion and already contains a significant amount of content. At the same time, he acknowledged that losing part of the team requires some adjustments. Holt declined to reveal how many employees were laid off during the transition to independence, explaining that reducing the loss of friends and colleagues to a simple statistic would fail to represent the impact of the process, which he described as painful for the team.

Despite the situation, the executive says Undead Labs retained everything it considers necessary to finish State of Decay 3. The game is currently being tested by a closed group of players with a Steam page listed already, while the relatively broad 2027 release window gives the studio some flexibility to make the necessary adjustments.

Holt also clarified why State of Decay 3 may seem like it has been in development for such a long time. The game was announced in 2020, with a trailer that became known for featuring an infected deer, but at the time only a very small team was working on the project. According to the executive, production only really ramped up between 2022 and 2023.

Interestingly, the decision to reveal the game so early was tied to Holt’s own concerns about the growth of the Xbox division. Microsoft had acquired Undead Labs in 2018 and, during that period, was rapidly expanding its portfolio of studios. Holt feared that his team could eventually be absorbed or reorganized within an increasingly large structure before it had the chance to publicly show what it intended to do with the franchise. Announcing State of Decay 3, therefore, served as a way to make it clear that the project existed and already had a defined vision.

Last Word on the Future of State of Decay 3 and Undead Labs

Undead Labs ultimately became part of Xbox’s divestment plans during the restructuring announced this year. Initially, the expectation was that a new owner would be found, and Holt says several interested parties emerged. The path ultimately chosen, however, was a management-led buyout, a proposal that was eventually accepted by Microsoft.

Even outside Xbox, the relationship between the two companies will continue. State of Decay 3 will launch on Game Pass on day one, and Holt acknowledged the importance of the service to the franchise, which he says has reached approximately 25 million players over its history. The difference is that Undead Labs is now directly responsible for its own results. For the studio, that means fewer parallel corporate objectives, but also greater responsibility: its survival will depend directly on its ability to finish State of Decay 3 and find an audience for it.