Microsoft's Undead Labs, developer of State of Decay 3, narrowly avoided closure during Xbox's recent restructuring that cut 3,200 positions. The studio was among those for which Xbox executives sought buyers after Microsoft CFO Amy Hood targeted them for potential shutdown. Despite development challenges following Microsoft's 2018 acquisition, State of Decay 3 ranks as the 28th most wishlisted game on Steam. The title surpasses other Xbox franchises including Halo Campaign Evolved and Gears of War: E-Day, trailing only behind Fable amongst Xbox titles. The studio faced significant setbacks after acquisition, including founder Jeff Strain's 2019 departure and pandemic disruptions. Though announced in 2020, the game only entered full development much later. The upcoming title features community management gameplay set in a zombie apocalypse with optional four-player co-op.

Former Xbox studios Double Fine and Compulsion will keep games after going indie. Jul 6, 2026 Microsoft is spinning off four of its Xbox game studios - Compulsion Games, Double Fine Productions, Ninja Theory, and Undead Labs - as part of the restructuring announced today. However, two that are going independent, Double Fine and Compulsion, will get to keep their franchises and games catalogs, according to Xbox CEO Asha Sharma. "Compulsion Games and Double Fine Productions will return to management and transition to independent studios with their IP, catalog, and runway for their next games," Sharma says in a memo. Compulsion and Double Fine have also shared statements about their futures. Here's Compulsion's: When Compulsion Gam... Read the full story at The Verge.

Xbox layoffs, studio closures, and spin-offs: everything announced today. Despite promises of a reset, the unveiling of a fancy new logo, and a charm offensive for its new leadership, the news at Xbox has been getting increasingly worse throughout 2026. Between massive price increases for Xbox hardware-and possibly another one soon-the fluctuating price of Xbox Game Pass, and the cancellation of funding on several collaborative projects, it has been a tough time to be a fan of Xbox. Can the news get any worse? Yes, if you're an employee of the company-or a fan of its studios, really. In recent weeks, Microsoft has been talking about how the Xbox division needs to start pulling its financial weight, and it has long been rumored that Xbox layoffs will start on July 6. Following a buying spree in the late 2010s and early 2020s, Xbox amassed a sizable portfolio of studios and employees, but it looks like many of them will be in the crosshairs as the gaming division aims to slim down. Several studios are reportedly up for sale, but if a buyer isn't found, it could be the end of the road for them. On what could be the bleakest Monday in Xbox history, GamesNu'll be keeping an eye on all changes hitting the various studios today. Compulsion Games. South of Midnight developer Compulsion Games will be leaving Xbox Game Studios and will once again become an independent studio. Jul 6, 2026 Double Fine Productions. Double Fine Productions is also exiting Xbox and will transition back into an independent game studio. Ninja Theory. Discussions for a new owner of Ninja Theory are underway, and the studio will continue to work on the Senua franchise. Undead Labs. State of Decay 3 developer Undead Labs is also in talks to find a new owner and continue working on its open-world zombie apocalypse series.