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State Of Decay 3 Was Announced Early To Keep Undead Labs On Microsoft’s Radar

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State Of Decay 3 Was Announced Early To Keep Undead Labs On Microsoft’s Radar

After leaving the Xbox Game Studios portfolio, State of Decay 3 developer Undead Labs is now an independent, employee-owned studio. The developer had previously announced State of Decay 3 all the way back in 2020--partly to keep the project and the studio on Microsoft's radar--as the company embarked on an acquisition spree. Now one of several departures from Microsoft's gaming division following the bloody "Xbox reset" that has seen scores of jobs slashed throughout 2026, Undead Labs also had to cut staff as it entered a new era. But was there any behind-the-scenes drama that led to its exit from Xbox?

Speaking to The Game Business, studio boss Philip Holt said that ultimately, nothing went wrong. It was more a case of reading the room and making a proposal to Microsoft that the company accepted. "It was an accelerated period of time for Microsoft's divestiture," Holt explained. "We had a lot of interest. I also thought that because we were so close to being in revenue, the amount of capital that we needed to finish [State of Decay 3] was not an insurmountable amount that we couldn't go raise it ourselves. I knew other studios were doing management buyouts, so I submitted an offer for a management-led acquisition, and Microsoft thought that would be a good idea."

Holt also addressed why State of Decay 3 was originally announced so far in advance, as in the eight years that it was under the Xbox umbrella, it never released a single game--but it did drop 38 updates for the popular State of Decay 2.


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