We’re following a fast-moving rumour that could put one of Xbox’s best-known survival teams on the market. Per Push Square, a wider report from Games Beat alleges that Undead Labs — the developer of State of Decay 3 — is searching for external investment as Microsoft weighs major studio actions.
What Was Reported
The core claim is stark: Undead Labs is allegedly among a group of studios seeking buyers or new funding amid impending Xbox cutbacks. Games Beat reports that Microsoft has been preparing to close multiple game studios if no buyers are found, and that it’s preparing to take action in early July, just after the close of the financial quarter on June 30.
- Undead Labs is identified specifically with State of Decay 3.
- Games Beat lists four studios that could be affected: Double Fine Productions (Kiln, Keeper), Undead Labs (State of Decay), Compulsion (South of Midnight), and Ninja Theory (Hellblade/Senua).
- The report says some studio jobs might be saved if buyers are found for any of the four studios.
Push Square also flags that Undead Labs had recently confirmed State of Decay 3 for the PS5 at the Xbox Showcase just weeks ago, and that the team has been sharing exclusive pre-alpha gameplay footage with YouTubers — footage that has reportedly stirred online enthusiasm.
The Source & Credibility
There are multiple threads to this story, some corroborating and some cautious. Windows Central journalist Jez Corden is reported to have corroborated Games Beat’s claims about Undead Labs facing potential cuts or a search for alternative funding. Corden is quoted as saying “Xbox Games Studios’ teams are working seven day weeks to meet Microsoft’s cutbacks and save studios with potential sales to third-party suitors.”
Corroboration And Caveats
Bloomberg reporting (as referenced by Games Beat) previously named other studios — and Push Square notes that Bloomberg had already mentioned Double Fine, Compulsion, and Ninja Theory were searching for funding. Jason Schreier, writing on ResetEra, reportedly would not confirm or deny specifics about Undead Labs, saying he wanted to be “100% certain.” Schreier added that studios may not necessarily require a sale to survive and that “some of the studios that are lined up for closure will be spun out and taken independent again by their management, potentially saving some jobs.”
Take this with a pinch of salt: the story is driven by multiple outlets and unnamed internal reporting, and Microsoft has, per Push Square, not commented on these reports.
What It Could Mean
If true, the implications are several — and they aren’t mutually exclusive. Undead Labs could be seeking a publisher or third-party suitor, the studio could be spun out to operate independently again, or it could face significant layoffs if no buyer emerges. Games Beat suggests the jobs of some employees might be saved by sales, while other reporting warns that even studios unlikely to be closed will face heavy layoffs as Xbox deals with what the coverage calls a bloated business.
There’s a market argument in the coverage too: one voice in Push Square suggests Undead Labs might be well-placed to find a publisher because State of Decay 3 appears to be fairly far along and has generated enthusiasm from pre-alpha footage. That, if true, could make the studio attractive to third-party suitors — but again, that’s conditional on buyers emerging and on the veracity of the reports.
Why This Matters
This isn’t just about one studio or one game. Per the reporting cited by Push Square, the story sits alongside comments from Microsoft executives that hint at broader strategic shifts. The coverage references a jab from Microsoft CEO Satya Nadella — that “there's more monetisation of Xbox games happening on YouTube than at Microsoft” — and a warning from incoming Xbox boss Asha Sharma that the division needs a reset. Those remarks, if read alongside reports of looming studio decisions, suggest a company re-evaluating its gaming portfolio and cost structure.
We’ll continue to track this closely. For now, the picture is murky: multiple sources and corroborations point to activity around studio sales and cuts, but key figures have either not confirmed specifics or explicitly urged caution. If you care about State of Decay 3 or the future of studios like Undead Labs, Double Fine Productions, Compulsion, and Ninja Theory, this is a developing story to watch — allegedly happening right as Microsoft approaches a major financial milestone.
