State of Decay 3 studio Undead Labs lay off "a significant number" of "exceptionally talented developers" after gaining independence from Xbox

Undead Labs confirmed layoffs of "a significant number" of staff shortly after announcing independence from Xbox. The studio, known for State of Decay, transitioned to an employee-owned model but faces workforce reductions. Leadership expressed regret over the decision, acknowledging the contributions of departing developers. They emphasized the impact of these colleagues on the franchise and studio culture.

The announcement follows Microsoft’s July plan to split with five studios, including Undead Labs. This marks the second round of layoffs for studios under Microsoft’s ownership in 2024. The cuts reflect broader industry trends of restructuring amid financial pressures. Undead Labs expressed solidarity with affected employees and offered support in finding new roles.

Undead Labs described departing staff as "exceptionally talented developers" who shaped State of Decay 3 and the studio’s identity. The studio pledged to maintain connections with these employees and assist other studios in hiring them. Leadership framed the layoffs as a difficult but necessary step for the studio’s future independence.

The transition to independence has forced Undead Labs to implement workforce reductions, mirroring actions taken by other studios. Double Fine laid off 23 staff in July, while Compulsion Games sought alternative development paths. Ninja Theory’s future remains uncertain after failed sale attempts, and Arkane’s status is still under consultation.