As Undead Labs navigates a major restructuring, the long-in-development State of Decay 3 is officially moving away from its previous Microsoft-controlled requirements. According to a report by Game File, the sequel will continue development under new ownership, but it will no longer be obligated to launch on Xbox Game Pass.
The update follows a broader announcement from Xbox CEO Asha Sharma regarding significant company-wide layoffs affecting 3,200 staff members. As part of this restructuring, both Undead Labs and Ninja Theory are set to transition to new owners. While the specific identities of these new owners have not been disclosed, Sharma confirmed that the transition includes secured funding to both complete and grow their respective titles, State of Decay 3 and Senua.
A Shift in Strategy for Undead Labs
State of Decay 2 famously launched as a day-one title on Xbox Game Pass in 2018, establishing a precedent for the franchise. However, with the studio exiting the current Xbox management structure, the upcoming third installment will not be bound by those same mandates. Sources indicate that the game will continue to receive necessary funding, but it will not be required to adhere to "any Xbox-controlling terms," including the service-based distribution model that defined its predecessor.
This news arrives during a volatile period for Xbox's subscription services. Earlier this year, chief strategy officer Matthew Ball noted that the service had shed millions of subscribers following a substantial price hike in October 2025. Although Microsoft implemented a price reduction in April 2026, the company is still working to stabilize the platform following what Sharma described as an eight-month decline.
What Happens Next?
While the change in ownership marks a departure from standard Microsoft studio operations, the focus for the development team remains on finishing the project. Fans waiting for more details on the studio's future can expect a formal reveal regarding the new ownership entity later this summer. For now, the transition leaves the future of the series—specifically its relationship with the Xbox ecosystem—in a state of flux.
The restructuring is part of a larger, industry-wide trend of consolidation and re-evaluation. With the studio set to operate outside of the current Xbox-controlled terms, State of Decay 3 joins a growing list of titles that are redefining their launch strategies as developers look toward independent or alternative ownership models.