Undead Labs boss says games investors are waiting for 'obvious slam dunks' as labour costs bite
Philip Holt, studio head of State of Decay developer Undead Labs, says investment capital remains available in the games industry but backers are holding out for near-certain hits, with rising labour costs a central concern. His comments follow the studio's buyout from Microsoft and subsequent layoffs.
The head of State of Decay developer Undead Labs has said there is still money circulating in the video games industry, but that investors are increasingly reluctant to commit it, preferring to wait for what he called «obvious slam dunks». Philip Holt's assessment of the investment climate came as he offered an inside account of the studio's recent separation from Microsoft.
Undead Labs completed a buyout from the Xbox owner last month, a move that followed the collapse of a deal with unnamed buyers. Staff established a new holding company, Full Measure, to structure the transaction. The independence was not without cost: layoffs followed the buyout, underlining the financial pressure even on studios with established franchises.
Holt's central argument is that the problem is not a shortage of capital but a change in how it is deployed. He described a market in which financiers remain active but have narrowed their focus to projects that appear almost guaranteed to succeed. The phrase «obvious slam dunks» captures a mood in which publishers and investors are unwilling to absorb the risk that has traditionally funded mid-sized and experimental titles.
Labour costs are a key part of that calculation. As development budgets have risen, so has the expense of retaining skilled staff, particularly in markets where competition for talent is intense. For investors weighing a project, those costs make the downside of a miss harder to absorb, reinforcing the preference for safe bets over speculative ones.
The comments add to a picture of an industry that has been contracting after a period of rapid expansion during the pandemic. Layoffs have been widespread across major publishers and independent studios alike, and consolidation has continued as larger companies absorb smaller teams. Against that backdrop, the decision by Undead Labs to buy back its independence stands out as an unusual move.
The creation of Full Measure as a holding company suggests the studio is seeking a structure that gives it greater control over its own destiny, even as it navigates the same funding environment Holt describes. The layoffs that accompanied the transition indicate that independence has not insulated the studio from the need to manage costs.
For the wider games business, Holt's remarks point to a funding gap that could shape which games get made. If investors concentrate on projects with obvious commercial appeal, the space for riskier concepts narrows. That in turn affects the range of titles reaching players and the willingness of studios to experiment with new ideas.
His observations also highlight a tension between the availability of capital and its willingness to move. Money that sits on the sidelines does not fund development, and the longer investors wait for certainty, the more pressure builds on studios that depend on external backing. For teams without a hit franchise or a self-sustaining revenue stream, that environment can be unforgiving.
Undead Labs' experience illustrates both sides of the equation. The studio has a recognised series in State of Decay, yet it still faced a failed sale, a complex buyout and job losses. Holt's account suggests that even established names are not immune to the caution now shaping investment decisions.
Whether that caution eases depends on how the next cycle of releases performs. If a run of successful titles restores confidence, capital may begin to move more freely. Until then, Holt's description of investors waiting for «obvious slam dunks» is likely to remain an accurate summary of the mood in games financing, with labour costs continuing to weigh on every calculation.
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