Games industry investors are "sitting on the sidelines waiting for obvious slam dunks", says Undead Labs boss, with labour costs a key worry
Undead Labs’ boss Philip Holt says investors now demand “obvious slam dunks,” with Seattle’s high labour costs and slower decision-making deterring funding for State of Decay 3.
Undead Labs, the studio behind State of Decay, recently completed a management-led buyout from Microsoft after a potential Tencent-affiliated deal with Splash Damage collapsed. Studio head Philip Holt described the accelerated divestiture process as a period of intense interest, during which the studio explored multiple offers before selecting the buyout route.
Holt characterised the current investment climate as cautious, noting that prospective backers typically sought majority control, which would limit the studio’s operational freedom. He observed that available capital is “nervous,” with investors waiting for clear, low-risk opportunities rather than backing mid-sized studios like Undead Labs.
Labour costs emerged as a central concern, with Holt highlighting Seattle’s status as one of the most expensive places to develop games globally. Investors scrutinised the studio’s unit labour costs, comparing them unfavourably to regions where development expenses are significantly lower, reflecting what Holt described as a broader “race to the bottom on the economics of labour.”
Despite the buyout and subsequent layoffs, Undead Labs remains committed to releasing State of Decay 3 next year. Holt emphasised that the studio will scale its operations to match audience demand, though the transition has required adjustments to the game’s development roadmap following the organisational changes.