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Undead Labs has completed its separation from Xbox and is now an independent, employee-owned studio. Studio Head Philip Holt says the shift changes the business goal behind State of Decay 3: rather than building toward tentpole status with first-party backing, the studio must reach launch with a sustainable cost structure and enough revenue to support itself. The game is still in development, with a 2027 release target—not a guaranteed date.
What changed when Undead Labs left Xbox
Undead Labs says its separation from Xbox is complete and that it now operates as an independent, employee-owned studio. The studio’s relationship with Microsoft spans more than 15 years: the original State of Decay launched in 2013 in partnership with Microsoft, and Microsoft acquired Undead Labs in 2018. Undead Labs’ announcement describes the transition.
| # | 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 the capital needed to complete State of Decay 3 could be secured. After several offers, financing came through a publisher relationship rather than outside investors. The publisher’s identity, deal terms, and the amount of capital involved have not been disclosed.
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Fix the driver behind crashes, sound loss and screen glitchesFind Drivers →Clear out junk files and repair common Windows errorsFree Scan →Scan for outdated or missing drivers - takes under a minuteDriver Scan →Holt said all Full Measure shareholders are Undead Labs employees and that the company was in the process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. The studio has not published final ownership percentages or an allocation of shares and options.
#1 Best Overall
- 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
- Model Compatibility: Xbox One;Xbox One X Enhanced with higher resolutions, steadier framerates and better effects
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Why the business calculus is different
Holt described the Xbox-era ambition as making State of Decay a major first-party franchise with sufficient support. Independence changes the immediate test: the studio needs a cost structure it can sustain through launch, with revenue from the game supporting the company afterward.
“Inside of first party, the idea for State of Decay has always been that given proper support, it could ascend to tentpole status alongside some of the biggest brands inside Xbox. As an independent company, we have to make sure that we can survive and that we have a durable cost structure that’s going to not only get us through launch, but we’ll be supported by the revenue that we produce.”
Rank #2
State of Decay- Year-One Survival Edition
- Unlocking Heroes: Lifeline Roster
- New weapons: Under-barrel attachments and Incendiary Ammo
- New Music
- Community Improvements
— Philip Holt, Studio Head of Undead Labs, The Game Business
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That does not mean the studio has stopped caring about ambition or quality. Holt acknowledged that Xbox also treated making the best possible game as a priority. He said independence gives Undead Labs a “cleaner, clearer line of sight to the audience” and makes the company directly accountable to the people who play its games. In his words, “I’m in the battle of entertaining an audience. As long as I have an audience that appreciates what we make, then we scale the business to the size of that demand.”
Rank #3
- 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
Costs and the size of the audience
Holt identified team costs and the speed of decision-making as part of the funding challenge. He also pointed to Seattle’s high labor costs, while rejecting a strategy based on competing to drive labor costs as low as possible. His stated focus is to entertain an audience, then size the business to the demand for its games.
How the transition 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, but he said there was no need for a radical rescope. He declined to give a departure count, saying he did not want to reduce the effect on friends and colleagues to a statistic. The studio is also working with co-development teams Virtuos, Wushu, and Blind Squirrel, according to Holt.
Rank #4
- Day 1 Edition contains a 5.3” x 7.3” softcover 70-page art book, a CD featuring select songs from the soundtrack, and a 7” x 4” Santa Destroy commemorative biker license plate, all in a custom box with an original illustration
- Grow Your Galactic Legend - In classic No More Heroes style, the Galactic Superhero Rankings are packed with outrageous boss battles, each oozing with personality; Soar through the ranks and prove you're the baddest in the universe
- Old Dog, New Tricks - From beam katana boss to wrestling pro, Travis can do it all; Take violence to new extremes with the customizable Death Glove, and punish those deadly invaders with combat that suits your style
- Superheroic Side Hustles - Explore Santa Destroy on Travis’ Demzamtiger to pick up odd jobs, from Coast Guard missions to toilet cleaning, then hit the road to unique locales like Neo Brazil and Thunderdome to keep the cash rolling in
- Bolder, Badder, and Better Than Ever - Thanks to sharper visuals, No More Heroes 3 has never looked better; Add in improved load times and better responsiveness, and you’ll be dishing out eye-popping ultra-violence in no time
Undead Labs says the game is in alpha and that the team is working toward a closed beta before the end of 2026. Its announcement gives a 2027 release target for Xbox, Game Pass, PC, and PlayStation. Xbox Wire also described 2027 as the target in its June 7, 2026 feature. Those are public targets, not a confirmed launch date; the studio has not announced a more specific date. The studio’s announcement and Xbox Wire’s feature provide the stated schedule.
What players can expect from the game
In Xbox Wire’s June 7, 2026 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 its 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. Xbox Wire’s feature contains the gameplay details.
The studio’s support history offers context for its relationship with the franchise: Holt said Undead Labs released 38 updates for State of Decay 2 during its eight years as an Xbox studio. That figure describes updates, not new game releases.
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