State of Decay 3: Undead Labs Explains Early Reveal, Xbox Split and 2027 PC Game Pass Launch

What Holt actually said​

In the interview, Holt described the 2020 reveal as a hedge. He told host Christopher Dring that he did not think Microsoft was done being acquisitive. Wait: that line is from Holt's interview, not Wikipedia. I'm therefore attributing it only to Holt's own words as reported by The Game Business and IGN. He assumed Microsoft would stop buying small developers and start buying "big things".

The next part is the key line. He said he was worried about getting swallowed up or divested before the studio could show the world what it was working on. In his words, the announcement was "a bit of a marker on the table." State of Decay 3 was named publicly, the audience knew it was in development, and a trailer demonstrated the team's vision.

This is Holt's retrospective explanation. It is not a Microsoft policy statement, and it doesn't show that Microsoft planned to sell Undead Labs in 2020. It also doesn't show that the early reveal caused anything that followed.

An early reveal, a small team​

Holt also gave a candid account of how little existed behind that first trailer. He said he "got in a little trouble" for saying there was no team on the game at the time. That wasn't entirely true, he said, because a very small team existed. He put it this way: a small team had worked on the game since around 2020, but development didn't really pick up until 2022 or 2023.

The trailer with the "infamous zombie deer", as he called it, was therefore a statement of intent rather than a progress report. The interview doesn't give a headcount for that early team or a month when full production began.

For comparison, Xbox's own June 7, 2026 interview with creative director Kevin Patzelt covered the first gameplay reveal at that year's Xbox Games Showcase. Patzelt said everything in the trailer was in-game capture, with no CGI apart from the studio logo. He said the game is built in Unreal Engine 5 and supports solo play or shared-world co-op for up to four players. Xbox's post said the game would arrive in 2027 and that players were already testing an alpha build.

From Xbox studio to employee-owned​

The interview sets the 2020 anxiety against what has happened since. Per The Game Business, Xbox said at the start of July that Undead Labs had a buyer. It was one of five studios Xbox was looking to offload, and Splash Damage was understood to be the buyer. By September the buyer turned out to be Undead Labs' own employees, and the game had a new, unnamed publisher.

Holt said he didn't think anything "went wrong". He called it an accelerated period for Microsoft's divestiture. He said he judged the capital needed to finish the game was achievable, so he proposed a management-led acquisition, and Microsoft agreed.

Holt said he created an acquisition vehicle called Full Measure, which is owned by Undead Labs employees. He said the company is in the process of issuing stock options to all staff.

Independent reporting confirms the broad outline:

• Kotaku reported that after more than a decade under Xbox ownership, the studio completed its separation and is now independent. The date was September 22.
• TheGamer reported that the studio is completely employee-owned, meaning it isn't publicly traded and has no shareholders.
• Kotaku also reported that the game is in alpha and the team is still working toward the previously announced closed beta before the end of the year. It said the 2027 target on PS5, Xbox and PC still stands, and the game will still arrive on Game Pass.

The cost: layoffs​

The independence came with job losses. Push Square reported that the team said it had undergone "significant" job losses on the same day another wave of Xbox layoffs was confirmed.

Holt told The Game Business that with so many people leaving, the team had to "make some changes" to the game. He said there was no need to radically rescope the project. He declined to give a number, saying he didn't want to reduce the impact on colleagues to a statistic.

He blamed a tough funding market and Seattle's high labor costs. He said investors were nervous and that the offers on the table varied in size and speed of decision. He chose a deal with a publisher rather than outside investors, noting that any financial institution would probably have wanted a majority share.

The studio also relies on three co-development teams: Virtuos, Wushu and Blind Squirrel. Holt said it has the financial runway to reach launch. These are all Holt's statements, and the studio's September announcement does not independently confirm them.

Why Xbox and PC readers should care​

Holt says the relationship with Xbox isn't ending. State of Decay 3 is still set to launch on Game Pass on day one, and he credited the subscription with helping the franchise reach 25 million players. He said the series has high churn but also a very loyal group of long-term players. The interview doesn't say how the 25 million figure was measured.

His plan leans on Game Pass for growth. The game's biggest investment is four-player shared-world co-op. The idea is that Game Pass subscribers bring in friends, many of whom will be on other platforms. That matters for Windows players because the game is expected on PC alongside Xbox and PlayStation.

One caveat for anyone checking store listings. Xbox's own pages may still show Xbox Game Studios as the publisher, even though the studio has said the game has a new, unnamed publisher. Which listing is current is something to watch rather than assume.

Analysis: what to take from it​

• A small bet at the time. Holt called it "a relatively small game inside a giant organization". That made a public reveal a way of staking a claim.
• A bigger picture of Xbox change. IGN's coverage adds that Microsoft acquired Undead Labs in 2018, alongside Playground Games, Ninja Theory and Compulsion Games. It says Undead Labs has since gone independent, Ninja Theory is closing, and Compulsion is charting its own path.
• Self-serving risk. An executive explaining his own past decisions after the fact can be tidy. The sources show he held this worry, but not that it was the only reason for the announcement. Holt himself said "partly".
• Execution risk. As an independent studio with no revenue yet, a missed milestone is no longer something a trillion-dollar parent can absorb. Holt acknowledged that pressure.

Bottom line​

By Holt's account, an early reveal was a defensive move in a company that kept buying and later started selling. Six years on, the game is in alpha, the studio is employee-owned and smaller, and a 2027 launch is planned for PC, Xbox and PlayStation with Game Pass on day one. The sourcing is thin on specifics: no layoff number, no publisher name, and no measurement method for the player figure. Those gaps are worth remembering when the closed beta arrives.