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Undead Labs Becomes Employee-Owned After Xbox Separation and Confirms State of Decay 3 Is Still In Development

The studio is now employee-owned and says State of Decay 3 remains in alpha with a closed beta planned before year-end.

  • On Tuesday, Undead Labs officially completed its separation from Microsoft, becoming a fully independent, employee-owned game development studio after more than 15 years under Xbox ownership.
  • This separation follows Xbox's ongoing "major reset," a restructuring that divested from several studios including Double Fine and Compulsion Games, which successfully separated last month.
  • Undead Labs confirmed active development of its zombie survival game, currently in alpha with a closed beta planned before year-end and a full release in 2027 on Xbox, Game Pass, and PlayStation.
  • The title will remain on Game Pass despite the separation, a decision fans on Reddit praised as a "double win" that lets developers maintain independence while subscribers retain access.
  • In contrast, Xbox confirmed on Tuesday that two acquisition deals for Hellblade developer Ninja Theory fell through, leaving the studio in the process of closing down.
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Under Labs has separated from Microsoft to become an independent studio and is now being held by its own staff. Despite this great change, State of Decay 3 keeps the launch window marked for 2027 and has arrived at the Xbox Game Pass right on the first day. Read more

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NewsGaming.net Undead Labs (State of Decay) officially leaves Xbox and becomes an independent studio owned by its employees The pursuit of the great "Reset" on the side of XBOX created a stir at the [...] The article Undead Labs (State of Decay) officially leaves Xbox and becomes an independent studio owned by its employees is available on NewsGaming.net

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State of Decay broke the news on Tuesday, September 22, 2026.
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