Philip Holt, CEO of Undead Labs—the developer of the “State of Decay” series—told GamesIndustry.biz, an international media outlet, that the process of separating from Xbox had been “a truly difficult three months.”
Three Months of Uncertainty Following the Split from Xbox
In July 2026, Xbox announced plans to sell five studios, including Undead Labs. Initially, negotiations were underway to bring the studio under a new owner, but the sale ultimately fell through, and the studio became independent following a management buyout.On September 23, the studio announced staff reductions resulting from the independence, and subsequently explained the impact on the development of *State of Decay 3*.
Regarding the situation at the time, Philip Holt stated, “Although there were some signs before the official announcement, it still came as a shock,” adding, “Employees feared what would happen if they all lost their jobs and were increasingly anxious that *State of Decay 3* might not be released.”
To alleviate the staff’s concerns, the company provided weekly updates to all employees over the following months and arranged opportunities for direct discussion. As a result, he noted that the internal atmosphere calmed down and trust within the company was strengthened.
Undead Labs ultimately signed a contract with a publisher that has not yet been disclosed, and it is now expected that the company will be able to complete *State of Decay 3* without receiving funding from outside investors. Additionally, the company is moving toward an “employee-owned” structure in which all employees will be granted stock.
Although CEO Holt himself does not hold a majority stake, he maintains managerial control by establishing shares with stronger-than-usual voting rights. “It took a great deal of willpower to reach this point. It was a truly difficult three months,” Holt commented.
However, not everyone was able to weather these past three months. After becoming independent, the company laid off a “significant number” of employees to maintain a sustainable company size.
Holt said, “It’s truly heartbreaking when talented frontline staff who’ve done nothing wrong lose their jobs due to management decisions.“I absolutely want to avoid headlines like ‘Undead Labs Lays Off ●● People.’ When presented as mere numbers, the humanity of each individual staff member who had to leave is lost, and it feels like a disrespectful act,” he explained, which is why he has not disclosed the exact number of employees who were ultimately laid off.
When asked about the current state of Xbox, Holt replied, “I’m trying not to think about it too deeply.” He explained that debating whether Xbox’s decision was correct is pointless, and that there are plenty of other things to focus on, such as developing *State of Decay 3* for release and ensuring its success after launch.
He also commented, “Our driving force is entertaining players—not profit or capital. We make games to serve our users. If we do that, they’ll support us.”
"It was a pretty harrowing three months" – Undead Labs head Philip Holt on what happened after Xbox cut the studio loose
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On the international forum Reddit, there were reactions such as comments that the *State of Decay* series holds a special place in their hearts and that they love it. Following this news, it seems some people are hopeful that development is proceeding smoothly and are hoping the game will have fewer bugs compared to previous titles.
*State of Decay 3* is scheduled for release on PC (Steam/Microsoft Store), PS5, and XBOX Series X|S. Although the studio is no longer affiliated with Xbox, the game is still expected to be available on Game Pass.
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