State of Decay studio Undead Labs has spoken out after rebuying its independence and leaving Xbox last month, revealing it has “got to make some changes” to State of Decay 3 because of layoffs it suffered as a result.

Studio boss Phillip Holt said this during a wide-ranging conversation with The Game Business, in which he detailed the studio’s shifting priorities now it has no “boss” to respond to other than its audience, and while explaining why the co-op zombie survival game seems to have been in development for ages.

“We’re pretty close to finishing this game,” Holt said. “And there’s a lot in it. I think folks that saw us at Gamescom can attest to that. I think our alpha players can attest to that. And obviously, with a significant number of people leaving the company, we’ve got to make some changes. But I don’t think we’re dramatically addressing scope in that way.”

State of Decay 3 currently has a vague release date of “2027”, announced this summer, which allows Undead Labs some scheduling wiggle-room. But the game was originally revealed all the way back in 2020, before slipping out of view for a long time, leading people to wonder about what was going on.

“I was a little worried about getting swallowed up or divested before we had a chance to present to the world what we were working on” -Phillip Holt

“I don’t think it’s taken that long, actually,” Holt remarked, when speaking about the game’s long development. “If you measure it from when State of Decay 2 shipped, yeah, we’re approaching eight years. If you measure it from our first trailer with the infamous zombie deer, that’s also a long time. I got myself in a little bit of trouble by saying we didn’t really have a team working on the game at that point, which wasn’t entirely true, we had a very small team. We’ve had a small team on the game since maybe 2020. But development didn’t really pick up until 2022 or 2023.”

But why did Undead Labs announce the third State of Decay game so early? The answer is eerily prophetic, and it’s to do with the spending spree Microsoft was on when it acquired Undead Labs in 2018 – the same spending spree that saw it acquire Ninja Theory, Compulsion Games, and Playground Games (two of which are also no longer a part of Xbox). Holt wanted to announce State of Decay 3 before Undead Labs was “swallowed up or divested” by the rest of a much bigger gaming division, he said.

“I didn’t think Microsoft was done being acquisitive,” Holt explained, “and I didn’t think they’d continue buying small developers – I assumed they’d start buying big things. I was a little worried about getting swallowed up or divested before we had a chance to present to the world what we were working on. So, it was a bit of a marker on the table. I was saying, ‘State of Decay 3, we’re announcing it, the audience knows it’s in development, and here’s a trailer to demonstrate our vision.'”

Undead Labs was eventually earmarked for divestiture this summer when Xbox announced its major restructuring. At the time, Undead Labs was said to have “entered terms to join new ownership”, but that new-ownership deal – as in the case of Ninja Theory – never actually materialised. “We had a lot of interest,” Holt assured The Game Business, but when he heard other studios were doing management buyouts, he submitted one for Undead Labs, “and Microsoft thought that would be a good idea”.

Holt wouldn’t say how many people were laid off as a result of the studio downsizing to operate independently, “because these are our friends and colleagues and it was a total heartbreak to have to part ways”. “I would hate to reduce the impact to those individuals to a number or statistic,” he said. But he insisted the studio had “everything we need to ship State of Decay 3”, and that its mission was now even clearer.

“Inside of a larger company, you serve multiple objectives and you have directives that you need to achieve,” Holt said. “Now it’s just: make the best possible game. Of course, inside Xbox, that was also the primary objective. But it’s just a cleaner, clearer line of sight to the audience. I don’t have a boss. The success or failure of the company is down to whether we create something an audience will support.”

State of Decay 3 will still launch on Game Pass on day one, and Holt praised Xbox’s subscription service as being partly responsible for the series’ ongoing success, which has apparently seen it reach 25 million players over its lifetime. “I don’t know that we’d be in the place we are today if not for the Game Pass audience,” he acknowledged. “Even today, we have several thousand people coming through the door every day.”

Dom had a chance to play State of Decay 3 and echoed what Holt said above, that the game was looking good. They’re hoping to find some time to write more fully about it soon. (Ask them about it in the comments!)