State of Decay 3 is getting closer. Undead Labs studio head Philip Holt says the game is “pretty close to finishing,” even after the layoffs that came with the studio’s split from Xbox. He made the comments in an interview with The Game Business, his first detailed conversation about the deal.
Xbox put Undead Labs up for sale this summer, and The Game Business reports it understood UK developer Splash Damage was set to buy it. Instead, the studio’s own employees ended up owning it. “We had a lot of interest,” Holt said. “I also thought that because we were so close to being in revenue, the amount of capital that we needed to finish [State of Decay 3] was not an insurmountable amount… I knew other studios were doing management buyouts, so I submitted an offer for a management-led acquisition, and Microsoft thought that would be a good idea.”
Holt set up a company called Full Measure, a name taken from the Gettysburg Address, to buy the studio. Every shareholder is an Undead Labs employee, and stock options are being issued to all staff. The game is funded through a publisher deal rather than outside investors, and three co-development studios, Virtuos, Wushu, and Blind Squirrel, are helping finish it.
The deal came with what Holt called “significant” layoffs. He declined to share the number. “These are our friends and colleagues, and it was a total heartbreak to have to part ways,” he said. He added that the cuts mean “we’ve got to make some changes” to State of Decay 3, but nothing that “dramatically” reduces its scope. The game is in alpha and planned for 2027.
Holt also explained why the game was announced back in 2020, years before development really ramped up in 2022 or 2023. He said he worried Undead Labs could be “swallowed up or divested” as Microsoft kept buying studios, so the reveal trailer was “a marker on the table.”
State of Decay 3 will still launch on Game Pass on day one. Holt credits the service with helping the series reach 25 million players and says the game’s four-player co-op shared world is its biggest investment. RCG covered the buyout when it was announced: Undead Labs is now employee-owned after its Xbox split.
