A studio that spent years operating inside one of gaming's biggest divisions now answers to nobody but its players. That shift carries real weight, and Undead Labs boss Phillip Holt isn't pretending otherwise.
State of Decay 3 is still on track, but the road to getting there just got a lot bumpier. Following the studio's departure from Xbox and a management buyout that Holt personally submitted after hearing other studios were pursuing the same route, Undead Labs downsized significantly. Holt has now spoken at length about what that means for the game and the people behind it.
What the layoffs actually mean for the game
"We've got to make some changes," Holt said, speaking publicly for the first time since the studio went independent. "But I don't think we're dramatically addressing scope in that way."
The key here is that distinction between adjustments and a full redesign. Holt described the studio as "pretty close to finishing this game" and pointed to Gamescom and the closed alpha as evidence that there's already a lot of substance in the build. So this isn't a soft reset or a scope collapse. The changes are real, but they're not the kind that push a 2027 window into serious jeopardy.
Holt declined to put a number on how many people were let go, and his reasoning was worth noting. "These are our friends and colleagues and it was a total heartbreak to have to part ways. I would hate to reduce the impact to those individuals to a number or statistic." Whatever the figure, the team that remains is the one shipping the game.
Why Undead Labs announced State of Decay 3 so early
Here's the thing: the 2020 announcement, the one with the zombie deer trailer that everyone remembers, wasn't just an excitement play. Holt made a deliberate strategic call.
When Microsoft acquired Undead Labs in 2018, it was on a buying spree that also pulled in Ninja Theory, Compulsion Games, and Playground Games. Holt saw the writing on the wall. "I didn't think Microsoft was done being acquisitive, and I didn't think they'd continue buying small developers. I assumed they'd start buying big things." His solution was to plant a flag publicly before Undead Labs got absorbed or cut loose without anyone knowing what it was working on.
"I was a little worried about getting swallowed up or divested before we had a chance to present to the world what we were working on," he said. "So it was a bit of a marker on the table."
The irony is that the divestiture he feared eventually happened anyway, just years later and through a different mechanism. Two of the studios acquired in that same period, Ninja Theory and Compulsion Games, also ended up outside Xbox's structure. Undead Labs survived by buying itself back.
Development timeline, reframed
Holt pushed back on the narrative that State of Decay 3 has been in development for an unusually long time. "I don't think it's taken that long, actually." His framing: a small team existed from around 2020, but meaningful production didn't start until 2022 or 2023. That puts the real development window at roughly three to four years, which is fairly standard for a game of this scope.
The 2027 release window announced this summer gives the studio some breathing room, and Holt's comments suggest he's not anticipating that window changing. The alpha is already running with a closed group of players, which is a concrete sign of where the project sits.
Game Pass, 25 million players, and the new mission
State of Decay 3 will still launch on Game Pass day one, a commitment that survived the Xbox split. Holt credited the subscription service as a major driver of the franchise's reach, pointing to 25 million players across the series and noting that several thousand new players still come through the door every day.
"I don't know that we'd be in the place we are today if not for the Game Pass audience," he said.
The bigger shift is operational. Inside Xbox, Holt said the studio was serving multiple objectives and working to directives from above. Now the line is simpler: make the best possible game. "I don't have a boss. The success or failure of the company is down to whether we create something an audience will support."
For players who've been waiting since that deer trailer dropped six years ago, that clarity of focus is probably the most reassuring thing Holt could have said. If you want to stay close to the project as it moves toward launch, the State of Decay 3 beta playtest sign-up guide has everything you need to get on the waitlist, and the full State of Decay 3 guides collection will keep expanding as the game gets closer to release.
