Undead Labs has completed its separation from Xbox and is now an independent, employee-owned game studio. The change ends a relationship with Xbox that stretches back to the first State of Decay, while leaving the team’s central project intact: State of Decay 3 remains in development.

The studio confirmed the completed transition on September 22. Its position is unusually clear for a developer leaving a platform holder: it is no longer part of Xbox, but the next State of Decay is still planned for PS5, Xbox and PC in 2027, and is still set to launch through Game Pass.

That combination matters. Independence can suggest a clean break from prior business arrangements, but it does not automatically mean an in-progress game loses every previous distribution commitment. In this case, the stated platform and subscription plans indicate that Undead Labs’ corporate status has changed without changing the currently announced ways players are expected to access State of Decay 3.

An employee-owned studio, with State of Decay still at its center

Undead Labs studio head Philip Holt framed the transition around the studio’s relationship with its audience and the freedom to concentrate on making games. He pointed to the players who have supported State of Decay over the years and said the team intends to honor that trust.

The term employee-owned is significant, but it should not be stretched beyond what has been confirmed. It means ownership now resides with the employees rather than Xbox. It does not, on its own, establish the studio’s internal governance, the ownership percentage held by individual staff members, funding arrangements, or how publishing decisions will be handled after State of Decay 3. Those are separate practical questions, and no additional details were announced here.

What is known is that the studio is continuing work on its zombie-survival series rather than moving immediately to a different project. Undead Labs says State of Decay 3 is in alpha and that it is still working toward a previously announced closed beta before the end of the year.

Alpha generally describes a development stage in which the game is still actively being built and major elements may be unfinished or subject to revision. A closed beta, by contrast, is a more limited test involving selected participants rather than broad public access. Neither label guarantees a release date, but together they establish that the project remains in active production and that the team still intends to test it with players before launch.

The 2027 target and the platform picture

State of Decay 3 is targeting a 2027 release on PS5, Xbox and PC. It is also still expected on Game Pass. For prospective players, the important point is that the separation has not altered the announced platform list or subscription availability.

Related coverage includes Undead Labs Completes Xbox Separation, Remains at Work on State of Decay 3.

That does not make 2027 a fixed release date. A target is a stated goal, not a final calendar commitment, and development timelines can change. The more immediate milestone is the planned closed beta before the end of the year. Its scope, participant-selection process and exact start date have not been detailed.

The continued Game Pass plan also shows that a game’s business and distribution arrangements can survive a studio’s departure from a corporate parent. Players should avoid assuming that “independent” means “not associated with Game Pass,” or that multi-platform development means the game has stopped being part of Xbox’s subscription offering. The information currently available says the opposite on both counts.

A long relationship with Xbox

Undead Labs released the original State of Decay in 2013 with Xbox’s help. The studio then released State of Decay 2 in 2018, the same year Xbox acquired Undead Labs and added it to the Xbox Game Studios portfolio. The team has spent the intervening years working on State of Decay 3.

The completed separation comes after Xbox said in July that it planned thousands of layoffs and intended to spin off certain studios as independent companies. Undead Labs was among the studios identified for that path. The September update establishes that its process has now finished.

The wider picture remains unsettled for other teams caught up in the reshuffle. Two proposed deals involving Ninja Theory, the developer of Hellblade, did not go through. Ninja Theory is now in consultation for a potential closure, alongside Arkane. Meanwhile, Double Fine and Compulsion Games have already transitioned back to independent status.

Those divergent outcomes are an important reminder that a planned studio separation is not necessarily a completed one. For Undead Labs, the distinction is no longer hypothetical: the studio says it has completed the process and is operating as an independent, employee-owned company. For other teams, negotiations and consultation can produce very different results.

Readers following the broader corporate changes can find more context in our coverage of Xbox’s reported layoffs and studio reshuffle.

Development questions that remain unanswered

There is still plenty that has not been announced about State of Decay 3. Undead Labs has not provided a final release date within 2027, beta details, or further specifics about how the company’s new ownership structure will affect the project’s production. The current update is primarily a corporate-status confirmation coupled with a development check-in.

The game’s long development has also drawn attention to reports of difficult working conditions at the studio. Past employee allegations included burnout, harassment and a toxic workplace. Those claims are allegations, not findings established by this announcement, and the latest update does not address them directly or identify what workplace changes, if any, accompany independence.

That absence is worth noting without turning it into a claim either way. A shift in ownership may be meaningful for a studio’s ability to set its own direction, but it does not by itself demonstrate that every production or workplace concern has been resolved. The evidence in this update supports the change in corporate control and continued development of the game; it does not establish more than that.

What players can take from the update

  • Undead Labs is no longer owned by Xbox. The studio says it has completed its transition and is employee-owned.
  • State of Decay 3 is still underway. It is currently in alpha, with a closed beta still planned before year-end.
  • The announced release target remains 2027. That is a target, rather than a specific launch date.
  • The announced platform plan remains broad. The game is still targeting PS5, Xbox and PC.
  • Game Pass remains part of the plan. Independence has not changed that stated availability.

For now, the practical result is continuity for the game alongside a major structural change for the developer. Undead Labs has left Xbox ownership, but it has not stepped away from the franchise that defined its relationship with the platform holder. The next meaningful public signal will likely be further detail on the closed beta, followed by clearer information on the road to the game’s 2027 target.