The breakdown
When we reported on Xbox closing Ninja Theory and putting Double Fine and Compulsion on the block, Bloomberg's Jason Schreier added a quiet note on Bluesky: those three studios "aren't the only ones at risk." He wasn't speculating. He was warning.
He wasn't bluffing.
Undead Labs — the Seattle studio behind the State of Decay series — is now the fourth Xbox studio confirmed to be facing closure, per Games Beat. Around 110 jobs are on the line. The studio is actively searching for a buyer. If none materialises before the team disperses, State of Decay 3 almost certainly dies with it.
Here's what makes this one cut differently.
Undead Labs has been under Microsoft's wing since 2018 — eight years. In that time, they shipped one game: State of Decay 2, which released just weeks before the acquisition closed. Since then: nothing. State of Decay 3 has been in development for years with essentially nothing to show publicly until this month's Xbox Games Showcase, where it finally appeared with a proper trailer and a loose 2027 window.
Six years of development. A proper trailer. A 2027 release date finally attached. Players excited for the first time in years.
Weeks later: closure talks.
The timing isn't a coincidence — it's a pattern. Microsoft announced the showcase lineup while already knowing these cuts were coming. The games were revealed to show investors and players that Xbox still had a pipeline. The closures are happening because the numbers don't work. The developers in between are collateral.
What's still coming
Microsoft's fiscal year closes today — June 30. The restructuring wave is expected to land in early July, and by multiple accounts this is "the biggest single-cut series for Xbox" to date. Blizzard and Bethesda are also reportedly facing percentage layoffs in the same sweep.
The Undead Labs situation is slightly different from the Ninja Theory closure in one key way: they are actively looking for a buyer. That means State of Decay 3 isn't dead yet. A studio acquisition at the right price could save the project and the jobs. But buyers don't appear on deadline, and Microsoft has shown it'd rather shutter than negotiate patiently.
We'll update this as the July wave breaks. If you missed the original Xbox closures story — Ninja Theory confirmed shut, Double Fine and Compulsion in negotiation — the link is below.
