State of Decay 3 Dev Undead Labs Rumored to be Facing Closure - News
by William D'Angelo , posted on 01 July 2026 / 6,813 Views
Following reports last month from Bloomberg's Jason Schreier that multiple Xbox first-party studios were in negotiations with Xbox leadership to go independent or be acquired by another company as they are facing the potential of being shut down.
GameBeat's Dean Takahashi is now claiming a fourth studio - State of Decay 3 developer Undead Labs - is in the mix of possibly being shut down.
It was announced in June of this year that State of Decay 3 would launch in 2027 for the PlayStation 5, Xbox Series X|S, PC, and Xbox Game Pass.
"It’s possible some of the studio jobs will be saved if a buyer is found for any one of the four studios: Double Fine Productions (Kiln, Keeper), Undead Labs (State of Decay), Compulsion (South of Midnight), and Ninja Theory (Hellblade/Senua)," said Takahashi.
"At the least, hundreds of jobs are at stake. Double Fine Productions could lose 100 jobs if it is shut down. Undead Labs could lose 110 jobs. Compulsion could lose 90 jobs, and Ninja Theory could lose 135 jobs. All told, that’s about 435 jobs that could be lost."
Takahashi is also stating other developers and divisions at Xbox are "are expected to be hit with percentage layoffs." One source claims this is likely "the biggest single cut series for Xbox."
The Communications Workers of America (CWA) union District 9 vice president Frank Arce in a call with the press confirmed they are expecting Microsoft to start the layoffs in Xbox soon.
"Multiple reports in the press indicate that in days ahead Microsoft may initiate layoffs across its Xbox division, the very people who build its best-selling games," Arce said. "We’re here to say this plainly: those workers will not be traded as disposable."
A life-long and avid gamer, William D'Angelo was first introduced to VGChartz in 2007. After years of supporting the site, he was brought on in 2010 as a junior analyst, working his way up to lead analyst in 2012 and taking over the hardware estimates in 2017. He has expanded his involvement in the gaming community by producing content on his own YouTube channel and Twitch channel. You can follow the author on Bluesky.
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All that time and backing the game looks like ass. Reminds me of one of those unity 1 man hobby project trying to imitate another popular zombie survival game that's already out on market.
They are probably waiting on SoD3 reception to sales and if it undersell, the Studio is gone.
A few years ago this would have been devastating to me. Now? Meh. The first SoD was way better than the sequel. This one has been cooking too long imho. Sometimes games need to stay on a smaller scale.
Anymore?
When you look through the list of XGS developers, the only ones that you’d think are safe are Mojang, The Coalition, Halo Studios and Playground Games.
Of those so far not mentioned, I would think inXile, Obsidian, Rare, Turn 10 , World’s Edge could all be vulnerable.
InXile have Clockwork Revolution due out next year, but the situation with Ninja Theory shows that an upcoming game is no guarantee of security.
If they close inxile I will be well pissed. Wasteland series is epic.
