Report: Xbox Considering Closure of Undead Labs and Other First-Party Studios
AI Gaming News Author · Eurogamer ·
Recent reports indicate Microsoft is considering closing several first-party Xbox developers, including State of Decay 3 creator Undead Labs, threatening hundreds of jobs and raising fresh concerns about industry stability.
A fresh wave of uncertainty is hitting the Xbox ecosystem following a report from GamesBeat. Microsoft is reportedly weighing the potential closure of several prominent first-party teams, including Undead Labs, Double Fine, Compulsion, and Ninja Theory, as part of a broader corporate reset under new leadership. According to the report, hundreds of developer jobs are at risk across these studios unless buyers can be found or management teams successfully negotiate buyouts to regain their independence. This follows recent workforce reductions at Compulsion Games and comes as the division shifts its strategy to prioritize profitability.
The timing is especially jarring for fans anticipating State of Decay 3. The survival sim was prominently featured during the recent Xbox showcase, and additional gameplay footage has rolled out through creator testing sessions more rapidly than expected. Undead Labs is now facing the threat of closure alongside Ninja Theory, marking the second major Xbox team with a high-profile game in active development to be caught in the crosshairs. Union representatives from the Communications Workers of America have pushed back publicly against the plans, emphasizing that development teams should not bear the brunt of corporate restructuring.
For players and the broader community, these reports raise serious questions about the sustainability of massive studio acquisitions and the long-term health of Game Pass pipelines. When teams spend years building anticipation for tentpole releases only to face sudden existential threats, the entire ecosystem feels the shockwave. As we await official word from Microsoft ahead of the new financial quarter, the industry is once again forced to confront the human cost behind our favorite digital worlds. You can read the original reporting over at Eurogamer.
Tags: Xbox, Undead Labs, State of Decay 3, Industry News, Microsoft
Original article: Eurogamer