Last month, State of Decay developers Undead Labs bought their own independence from Microsoft, after a deal with unnamed buyers fell through. The staff created a new holding company, Full Measure, to facilitate the buyout. Layoffs followed. Now, studio boss Philip Holt has offered an inside look on the transition, together with thoughts on the wider landscape of videogame industry investment. Short version: he thinks there’s still money washing around, but the fatter cats are very much looking for “obvious slam dunks”.

According to The Game Business, the unnamed potential buyer for Undead Labs was Tencent-owned UK outfit Splash Damage, who’ve worked extensively with Microsoft on Gears of War and Halo. In an interview with the site, Holt explained the decision to go independent instead. “It was an accelerated period of time for Microsoft’s divestiture,” he said. “We had a lot of interest. 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 that we couldn’t go raise it ourselves. 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 called the wider landscape of investment “challenging”, suggesting that any significant investor for Undead Labs would likely have required a majority share of the studio, reducing their freedom of action. “There’s capital available, but I think it’s nervous, perhaps sitting on the sidelines waiting for obvious slam dunks,” he said. “I can’t speak for investors, but I can say from talking to a lot of people in a position to invest in State of Decay, there were several factors.

“The amount of money and cost of team on one side of the economics, and the other was the speed in which decisions would be made,” Holt went on. “Anytime there’s challenge in an investment opportunity, it’s just easy for people to say no. So, we had several offers, and we were happy to pick the one that we did.”

Regarding the cost of team aspect, Holt noted that investors were worried about Undead Labs being based in Seattle. “We’re in one of the most expensive places in the world to make video games,” he said. “And, we’re seeing the rise of incredible games that are coming from parts of the world where the labor costs are just much lower. I was out talking to investors and publishers, and there was a lot of scrutiny around our unit cost of labor.” In general, he feels there’s a “race to the bottom on the economics of labor”.

Being independently owned at least gives Undead Labs full control over the scale of any job-lossening, not that this may be much consolation to departing staff. Holt added that “as long as I have an audience that appreciates what we make, then we scale the business to the size of that demand.”

The “race to the bottom” line echoes points made by Saber Interactive CEO Tim Willits in a chat with Julian with Gamescom. He exhorted the Great and the Good to, amongst other things, scoop up teams of collaborators in countries outside North America and Europe, where wages are lower. “You get your creative director, your animation guy, your programmers,” Willits said. “They have the knowledge and experience and the talent. Come up with some ideas, and then look around the world, find other studios, and I’m not talking about outsourcing, I’m talking about buying in a development team somewhere in the world. South America is huge now and the same time zone.” On which note, James recently interviewed a group of developers from Brazil and Argentina about their experiences of being treated as a source of cheap labour.

As for State of Decay 3, Holt says that Undead Labs have had to make a few changes to the game, following the buyout and layoffs, but are still aiming to release next year.