Undead Labs Becomes Employee-Owned After Xbox Cuts It Loose

Undead Labs, the Seattle studio behind the State of Decay games, is now an employee-owned company. Its staff hold the equity after Xbox let the studio go, according to studio head Philip Holt.

Microsoft bought Undead Labs in 2018. In July, Xbox announced plans to divest five studios, including Undead Labs. To divest means to sell off or let go of a business. Undead Labs spent the eight years that followed as an Xbox studio.

During that time, the studio did not release a new game. The Game Business reported that it put out 38 updates for State of Decay 2, which first arrived in 2018. The original State of Decay came out in 2013.

The new arrangement works like this. Undead Labs registered a new Delaware C corporation, a type of US company, which acquired Undead Labs and is issuing equity to all employees. Equity means shares in the company. The studio took no outside investors to finish its next game. Instead, it is paying for State of Decay 3 with cash on hand and money from a publishing deal.

Speaking to GamesIndustry.biz, Holt described the three months after the split as "pretty harrowing." He declined to say how many employees the studio lost when it became independent.

Development of State of Decay 3 is still underway. The game has a 2027 release window, meaning the studio is aiming for a period of that year rather than a set day. Undead Labs has reached an agreement with a publisher, but it has not yet named that partner. A publisher is the company that funds, markets and sells a game.

Holt also joined Christopher Dring on The Game Business Show to talk about running the studio on its own. Undead Labs is now responsible for its own payroll, its own contracts and its own schedule. The studio's next public milestones are the publisher announcement and the game's release window, and the company has not said when either will come.