Unionized Xbox workers pushed back against planned mass layoffs this week as reports emerged that Undead Labs, the studio behind the upcoming State of Decay 3, could be among the casualties of Microsoft's gaming restructuring.
Xbox CEO Asha Sharma said earlier this month that Microsoft was "resetting" its games business, language that media reports translated into potential studio closures and significant job losses. Bloomberg initially named Compulsion Games, Double Fine, and Ninja Theory as studios at risk.
This week, a fourth name surfaced: Undead Labs, the Seattle-based studio working on State of Decay 3.
VGC reported that some of these studios have entered negotiations to go independent in an attempt to avoid closure. The layoffs, expected to begin after Microsoft's fiscal year ends, are being described as potentially the largest single layoff event in gaming history.
The cuts are already rippling beyond Microsoft's walls. Bloomberg's Jason Schreier reported that Assembly, Xbox's main PR agency, is laying off employees today as Microsoft ends contracts and cuts vendors ahead of the main event.
"The massive Xbox layoffs won't happen until after the fiscal year ends, but the company is already ending contracts and cutting vendors," Schreier wrote on Bluesky. "So Assembly, Xbox's main PR agency, is laying people off today." A press conference held by the Communications Workers of America gave Xbox employees across multiple unions a platform to respond.
CWA district 9 vice president Frank Arce said Xbox workers "will not be treated as disposable." Referring to Xbox's recent console price increases, Arce added: "The money is there, leadership is simply choosing where it goes and who pays."
United Video Game Workers representative Sherveen Uduwana pointed out that Microsoft CEO Satya Nadella was paid $96.5 million last year. Diablo 4 senior environment artist Mahreen Fatima argued the company is "choosing not to protect us" after spending billions on AI technology.
QA tester Andrew Snell, who has 18 years of experience, told the conference: "We're done paying for executives' failures." The union demands include layoff protections for all Xbox staff, advanced notice, two years of recall rights, and hiring freezes.
The threat to Undead Labs carries particular weight. State of Decay 3 has been in development for years, with Microsoft investing heavily in what was shaping up to be a flagship Xbox title.
Losing the studio months before the game's likely launch window would echo Microsoft's controversial closure of Tango Gameworks last year, which came shortly after the studio shipped the critically acclaimed Hi-Fi Rush.
Bethesda Game Studios became the first Microsoft-owned studio to fully unionize in July 2024, followed by Blizzard's World of Warcraft team. Microsoft recognized both unions, but whether that recognition extends to protecting jobs during the coming cuts remains an open question.
