Undead Labs Goes Independent, But Layoffs Hit the State of Decay Team

Undead Labs, the developer best known for the State of Decay series, is leaving the Xbox fold and going independent. The announcement arrives with a heavy caveat: a significant number of the studio's staff are losing their jobs as part of the transition.

The news follows Xbox's second wave of layoffs this year, a restructuring that has reshaped Microsoft's gaming division and left several of its studios facing uncertain futures. For Undead Labs, the outcome is a mixed one. The team keeps its independence, but it does so at a much smaller size than before.

Undead Labs has been part of Microsoft since 2018, when the company acquired the Seattle-area studio to bolster its first-party lineup. The studio's zombie survival series has built a loyal following over the years, blending open-world scavenging, base building and permadeath-style character management. That formula has kept players coming back well beyond the launch windows of each entry.

The studio described the split as both good and bad news, acknowledging that the cuts are painful for those affected even as the company gains control of its own direction. The exact number of departing employees has not been shared, with the team only saying that it is significant.

For fans, the key question is what happens to the State of Decay franchise itself. Independence could give the studio more freedom to decide what it builds next and how it releases it, but a reduced team will also limit how ambitious those plans can be in the near term. Details on future projects, publishing arrangements and the status of existing games on Xbox and PC have yet to be spelled out.

The situation reflects a wider pattern across the industry, where studios are being trimmed, sold off or cut loose as publishers rethink their portfolios. Going independent can be a lifeline, but it also means the studio must now find its own funding and partners without the safety net of a platform holder behind it.

For now, the priority for Undead Labs is supporting the people who are leaving while stabilizing the team that remains. What comes next for one of Xbox's most recognizable survival franchises will depend on how that smaller studio chooses to move forward.