In a move marking a significant shift for the Xbox portfolio, it was announced on Monday that Undead Labs is leaving the Xbox Game Studios family. The departure brings an end to an eight-year tenure during which the developer, known for the State of Decay series, did not release a single new title under Microsoft’s banner.
Undead Labs was part of a high-profile expansion for Microsoft, acquired alongside Ninja Theory, Playground Games, and Compulsion Games on June 10, 2018. At the time, the acquisition spree was framed as a commitment to bolstering first-party game development. However, the outcomes for those studios have varied significantly.
A History of Undead Labs Under Xbox
Before being acquired, Undead Labs launched State of Decay 2. Following the acquisition, the studio focused on State of Decay 3. Despite the game appearing in recent showcases, the title remains unreleased. The studio now heads for new ownership without having delivered a project during its time as an Xbox studio.
The departure is part of a broader shake-up at Xbox. Compulsion Games is also leaving, opting for a management buyout to return to independence, while Ninja Theory is moving to a new, yet-to-be-disclosed owner. Of that original 2018 cohort, only Playground Games remains under the Microsoft umbrella. Playground has seen more consistent output, releasing three Forza Horizon titles and currently developing Fable.
Turbulence Within Xbox Game Studios
The exit of these studios arrives amidst a period of instability for the publisher. Reports have long pointed to internal challenges at Undead Labs, specifically regarding the development of the third State of Decay entry. These struggles are set against a wider industry trend of ballooning development times and a series of high-level layoffs and cancellations at Xbox.
The management of these studios has fallen under chief content officer Matt Booty, who has overseen the division since 2018. While some acquisitions have proven productive—such as Obsidian Entertainment, which has released five games since joining the platform—others have struggled to maintain a steady release cadence.
As Microsoft continues to prune its roster, the departure of Undead Labs serves as a closing note to a period of aggressive expansion that failed to yield the expected results for several of its marquee acquisitions.