Undead Labs might not survive to ship State of Decay 3

State of Decay 3 only just got its first proper gameplay trailer this year, six years after it was announced. Now there’s a real chance the studio behind it won’t survive to finish the job.

Undead Labs built its reputation on the original State of Decay games, two surprise hits that turned a scrappy zombie survival sim into one of Xbox’s most reliable franchises. The studio has now joined a growing list of Xbox studios facing an uncertain future, following reports already swirling around Double Fine, Ninja Theory, and Compulsion Games.

State of Decay 3 gameplay reveal

Microsoft reportedly seeking a buyer

According to a new report from GamesBeat, which cites CWA-represented Xbox workers criticising Microsoft’s management, Undead Labs could be shut down entirely. The workers reportedly accused Microsoft of mismanaging its Xbox division while pushing ahead with further cuts.

Microsoft is said to be hunting for a buyer for the 17-year-old studio. If nobody bites, around 110 jobs are reportedly on the line.

State of Decay 3 was first revealed back at the Xbox Games Showcase in 2020. It took six years, and a 2026 showcase appearance before fans saw any actual gameplay.

The zombie survival sequel is currently slated to launch on Xbox, PlayStation 5, and PC sometime in 2027, assuming Undead Labs is still standing by then.

Microsoft hasn’t commented on the rumoured layoffs, and the exact scale isn’t yet known. Multiple sources suggest hundreds of jobs across Xbox could be affected this round, with Undead Labs reportedly just one name on a much longer list.

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