Majesco Entertainment Company
Majesco Entertainment Company
160 Raritan Center Parkway
Edison, New Jersey 08837
Telephone: (732) 225-8910
Fax: (732) 225-8408
Web site: http://www.majescoentertainment.com
Incorporated: 1986 as Majesco Sales Inc.
Sales: $59.72 million (2005)
Stock Exchanges: NASDAQ
Ticker Symbol: COOL
NAIC: 511210 Software Publishers
Compared to the giants of the industry, Majesco Entertainment Company is a small, family-owned maker of interactive digital games, videos, and related gadgets. Founded in 1986 by Morris Sutton in Edison, New Jersey, Majesco produces games and videos for all popular hardware platforms, for all age groups, and at a range of price points. Noted company video game titles include BloodRayne 2, Jaws Unleashed, Advent Rising, and Black & Bruised. Majesco is also known for pioneering products specifically designed for Nintendo's Game Boy hardware line, such as cartridges for the handheld systems that play full-length animated movies and content from children's TV shows. The company's range of products are sold in major retail outlets in the United States, including Wal-Mart, Toys 'R' Us, Kmart, GameStop, Target, and others, as well as on the World Wide Web.
BEGINNINGS: A GAME NON-GAMER
Morris Sutton had been an investment banker for seven years and then an electronics distributor before he started Majesco Sales Inc. in 1986 with two of his sons, Jesse and Joseph. With Sutton as chief executive officer, the company slowly built a niche market around selling video game titles that had been abandoned by their original publisher. Not a gamer himself, Morris Sutton in 1995 approached video game giant Nintendo with a proposition that it just could not refuse. At the time, major video game makers were rolling out their more powerful 32- and 64-bit systems to replace the 30 million 16-bit platforms that had been purchased in North America since the early 1990s. Sutton, however, was convinced that there was still a market for the older games. As later recounted to the press, he told Nintendo: "Let me get the code and I'll give you a royalty." Nintendo granted Sutton exclusive rights to republish and distribute its complete catalogue of 16-bit software and Majesco began selling games and hardware for about a third of the cost of their original prices. Sutton made similar deals with other publishers and in 1997, the year Jesse Sutton became president of the company and Joseph Sutton was named vice-president, Majesco shipped nine million pieces of software for 16-bit game systems.
In 1998, the company formed Majesco Holdings Inc., and as a result, Majesco Sales Inc. became a wholly owned subsidiary and the sole operating business of the company. In early 1998, with Sega of America (SOA) on the verge of dropping its one-time market leading 16-bit Genesis product line, Majesco made a deal to take over North American manufacturing, distribution, and sales of all Genesis hardware and software. Majesco's plan called for manufacturing redesigned consoles in Mexico and selling both hardware and software at significantly reduced prices. The company also inked a deal in 1998 with Hasbro Interactive to become the exclusive publisher of ten Hasbro titles for the Game Boy Color platform, which had been launched in November 1997. The games were also playable on the original Game Boy, which had sold over 70 million units worldwide since its 1989 release. The titles included Monopoly, Millipede, Frogger, Centipede, Break-out, Battleship, and Missile Command, which at the time were some of the most well-known franchises in gaming history.
At the start of 1999, Majesco had licensing deals with 95 percent of the third-party 16-bit publishers, including Acclaim, Disney, LucasArts, Namco, and Virgin. In July 1999, Majesco Holdings Inc. launched Pipe Dream Interactive Inc. as a publishing division of the company, and announced that it was working on several original console-based games for distribution by Majesco Sales. In August, Majesco signed a licensing agreement with Japan-based Sega Enterprises, Ltd., parent company of SOA, to manufacture and distribute the popular but closed-out 16-bit Sega Pico "edutainment" system and software in the United States. For the holiday shopping season, Majesco shipped three additional titles for Game Boy Color under its agreement with Hasbro Interactive, including Pong, Tonka Raceway, and NASCAR Challenge.
In 2000, Majesco released Tom Clancy's Rainbow Six and its sequel, Rogue Spear, for Sega's Dreamcast platform. In 2001, Majesco added two titles for PlayStation 2, Soldier of Fortune and Star Trek Voyager: Elite Force, and released eight titles for Nintendo's Game Boy Advance (GBA), which made it the biggest third-party supporter of the new handheld system. At the time, the company had 80 employees, including 25 internal developers, and its publishing arm was producing 80 percent of the revenues, up from 50 percent in 2000. Founder Morris Sutton assumed the role of chairman of the board in December when the company appointed former Sony executive Steve Race as CEO.
Majesco released 17 titles in 2001, which was about half the output of the industry's top firms, California-based Electronic Arts and Activision. By 2002, the privately held company reported combined sales in excess of $500 million to date and more than 40 million total units of software sold. In April 2002, the company opened Majesco Europe, an office in England to oversee international product sales and distribution as well as product and license acquisitions. In May, the company announced a licensing agreement with Cartoon Network and Warner Bros. Interactive Entertainment to develop content for GBA based on popular TV cartoon characters.
TAKING THE PREMIUM PLUNGE IN 2002
Majesco made a bold and risky strategic move in the second half of 2002. At the time, the privately held company was generating about $50 million annually and claimed to be in the black. Having made its name as a manufacturer and distributor of value-priced second-generation video games and abandoned platforms, Majesco ventured into the hit-driven premium software publishing market, where it hoped a bestseller would propel the small company into a major market force. The company spent $4 million on TV, print, and online efforts to promote the Halloween launch of BloodRayne, a multi-platform game developed for Microsoft's Xbox, Nintendo's GameCube, and Sony's PlayStation 2. The M-rated (for "Mature") "supernatural action/thriller" featured a "half-human/half-vampire seductress" and was targeted at the core gaming audience of 18- to 34-year-old males.
We are an innovative provider of digital entertainment content and products. Our offerings include video game titles, video content titles and digital media peripherals and applications. Our diverse product portfolio provides us with multiple opportunities to capitalize on the large and growing installed base of digital entertainment platforms and an increasing number of digital entertainment enthusiasts. We sell our products to U.S. retail chains, including Wal-Mart, Electronics Boutique, GameStop, Kmart, Target and Toys 'R' Us. Over our 18-year history we have developed strong retail and distribution network relationships.
In April 2003, Majesco announced it would collaborate with award-winning science fiction novelist Orson Scott Card on a new series of video games, with Advent Rising, the first of a planned trilogy for Xbox, set for release in 2004. In September, the company sold the movie rights to its popular BloodRayne game franchise to Boll KG, a German film production company. On December 5, Majesco Sales Inc. completed a reverse acquisition with ConnectivCorp, a publicly traded company with no active operations. Before ConnectivCorp, formerly Spinrocket.com, ceased active operations, it had tried a number of different Internet-related businesses targeting marketers, pharmaceutical companies, and others. As a result of the deal, Majesco Sales Inc., as a wholly owned subsidiary and the sole operating business of ConnectivCorp, effectively became a publicly traded company under the symbol "CTTV." After the merger, founder Morris Sutton's family controlled 72 percent of the voting stock. Jesse Sutton was promoted to ConnectivCorp's CEO and his brother Joseph was named executive vice-president of research and development.
As the company began 2004, it distributed an estimated 90 titles for 13 platforms through an established network of large retailers and major rental outlets. Financially, Majesco was beginning to build some momentum due to strong sales of its GBA titles. The company reported revenues soared 84 percent to $24.6 million for the first quarter ended January 31. On April 14, 2004, the company changed its name from ConnectivCorp. back to Majesco Holdings Inc. and began trading on the Over the Counter Bulletin Board (OTC BB) under the new ticker symbol "MJSH."
BREAKING OUT IN 2004
In May 2004, Majesco launched its Game Boy Advance Video product line, based on the company's breakthrough video compression technology that made it possible to stuff 45 minutes of full-screen color video content with sound onto a standard 256-megabyte Game Boy cartridge. Majesco, in effect, created a new use for some 30 million Nintendo handheld systems in use in the North American, South American, and European markets where it was licensed for the product line. The initial release of 12 titles, targeted at children ages 6 to 12, included episodes of popular TV shows from content partners FUNimation Productions, Ltd., DIC Entertainment, Cartoon Network, and 4Kids Entertainment. Much to the delight of parents everywhere, Majesco's GBA Video product line included low-cost headphones designed to plug into the Nintendo system without the use of an adaptor. By July, the company had sold more than one million GBA Videos.
In August 2004, the company appointed Sony veteran Carl Yankowski as chairman and CEO. Jesse Sutton remained as president and founder Morris Sutton became the company's chairman emeritus. In addition to media buys for TV and gaming magazines, the $5 million marketing blitz for the October 2004 launch of BloodRayne 2 included tie-in promotions with MTV and Playboy Enterprises. Unlike its prequel, which received less than rave reviews, BloodRayne 2 went gold almost immediately, making it Majesco's first single-title million-seller. For its fiscal year ended October 31, 2004, the company lost $11.2 million on sales of $121 million, compared to sales of $46.6 million in fiscal 2003. In December, the company shipped its first three plug-and-play games, which were developed as standalone gaming units that plug directly into the TV. Its new TV Arcade product line was headlined by Frogger, a well-established title licensed to Majesco by Konami. It also shipped two "high-tech" accessories for the GBA, the Wireless Link, which allowed untethered game playing, and Wireless Messenger, which enabled instant text messaging and email between GBA users.
- Morris Sutton founds Majesco Sales Inc. in Edison, New Jersey.
- Company lands first big deal as republisher of abandoned Nintendo products.
- Pipe Dream Interactive is formed as Majesco focuses on developing original game content.
- Company risks millions to enter premiumpriced video games market with "BloodRayne."
- Majesco sheds privately held status with reverse acquisition of publicly traded shell company.
- Proprietary digital technology enables launching of popular Game Boy Advance video products.
- Public offering raises $75 million; name is changed to Majesco Entertainment Company.
- Overstated earnings projections and very poor sales drive severe share-price plunge.
Majesco began 2005 by changing its ticker symbol on the OTC BB from "MJSH" to "MJES." On January 26, the company announced a $75 million public offering of six million shares of common stock at a price of $12.50 per share, and moved its listing to the NASDAQ National Market System. On April 4, Majesco Sales Inc. was merged into Majesco Holdings Inc., which officially changed its name to Majesco Entertainment Company. On April 11, Majesco Entertainment Company began trading under the ticker symbol "COOL." At the time, company stock traded for around $9 a share, off about 35 percent for the year. The Memorial Day release of Advent Rising, the first of a proposed trilogy of science fiction adventure premium-priced games, was accompanied by a very aggressive and expensive marketing campaign.
RETREATING IN MID-2005
On July 12, 2005, Majesco's share price plunged 48 percent to close at $3.56 after the company drastically altered its 2005 revenue forecast and announced the resignation of chairman and CEO Yankowski. Investors were told to expect an operating loss of $16 to $19 million on revenues between $120 and $125 million, instead of operating income of $16 to $18 million on revenues of $175 to $185 million, as the company had predicted in June. Jim Halpin, CEO of CompUSA from 1992 to 2001, was named chairman, and a search for a new CEO was launched. Majesco's chief legal officer resigned in August after numerous lawsuits were initiated by shareholders that alleged the company made a "series of false and misleading statements."
Majesco's share price again plummeted by nearly 50 percent to close at $1.24 on September 13, the day after the company reported its third quarter 2005 financial results, which showed a net loss of $37.5 million on revenue of only $4.6 million. The company further lowered its 2005 projected net revenues to $65 million and estimated an operating loss of approximately $40 million. The company explained the downturn by citing weaker-than-expected sales, the delayed release of one movie-based game title, overstocked retailers, and weak reorders. On September 14, a securities class-action suit was filed in connection with the company's January 26, 2005, public offering.
In September 2005, the company signed apparel and collectible licensing deals for its BloodRayne franchise, a month after it shipped the PC version of BloodRayne 2 to retail stores nationwide. Concurrently, company president Jesse Sutton announced a revision of Majesco's business model to focus less on premiumpriced console games and more on lower-cost games for such handheld systems as Sony's PlayStation Portable and Nintendo's DS and Game Boy Advance players. In November, the company rolled out an expanded GBA Video line that included full-length animated video movies from DreamWorks, including Shrek, Shrek 2, and Shark Tale. Cash-strapped, the company raised $8 million in December when it sold the rights to two game titles under development.
Early January 2006 brought more bad news for Majesco, as a film based on the company's BloodRayne game, starring Ben Kingsley as Rayne's father, flopped at theaters. On January 18, 2006, Majesco finally announced its year-end financial results for fiscal 2005, which ended October 31. The company reported net revenues of $59.7 million and an operating loss of $70.2 million. Citing challenging market conditions, rising development and marketing costs, and disappointing sales for its 2005 releases, Advent Rising, Psychonauts, and Aeon Flux, Majesco said it would trim its 77-member workforce by 20 percent and announced that it had sold or canceled most of its premium console titles that were scheduled for release in 2006. In February 2006, Majesco's board of directors named company founder Morris Sutton as its chairman and interim CEO. On March 13, the company transferred the listing of its common stock from the NASDAQ National Market to the NASDAQ Capital Market.
In May 2006, Majesco released Jaws Unleashed, a game loosely based on the 1975 classic movie by Steven Spielberg. Developed by Appaloosa Interactive for the PlayStation 2, Xbox, and PC, the game sold for a suggested retail price of $29.99 for consoles and $19.99 for PCs. By mid-June, the title had attained top ten status on numerous industry bestseller rankings and the company appeared to be gaining a foothold in the portable games market with Age of Empires and Guilty Gear Dust Strikers, both developed for the Nintendo DS. In August, Morris Sutton returned to chairman emeritus status and Jesse Sutton, company president for the past ten years, assumed the interim CEO job and a seat on the board while a permanent CEO and board chairman were sought. On September 11, 2006, Majesco reported third quarter net revenues of $12.6 million, compared to $4.6 million for the same period in 2005. Its loss shrank to $724,000, or 3 cents a share, from $37.5 million, or $1.69 per share. Its operating loss also narrowed to $332,000 from $38.6 million. The company attributed the improvement to a more conservative approach to game development, an improved cost structure, and strong sales of Jaws Unleashed.
Even though Majesco's losses had narrowed in 2006, and the company significantly slashed game development costs and selling and marketing expenses, the year ended with the company's future in question. It remained to be seen whether the 20-year-old maker of interactive games, videos, and gadgets, majority-owned and guided by Morris Sutton and sons, could recover from its disastrous foray into the premium console games market and regain the solid footing and momentum it once had as a seller and distributor of value-priced content and products.
Activision, Inc.; Blizzard Entertainment; Capcom USA, Inc.; Electronic Arts Inc.; Take-Two Interactive Software, Inc.; THQ Inc.
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"Majesco Entertainment Company." International Directory of Company Histories, Volume 85. . Encyclopedia.com. (September 25, 2018). http://www.encyclopedia.com/reference/dictionaries-thesauruses-pictures-and-press-releases/majesco-entertainment-company
"Majesco Entertainment Company." International Directory of Company Histories, Volume 85. . Retrieved September 25, 2018 from Encyclopedia.com: http://www.encyclopedia.com/reference/dictionaries-thesauruses-pictures-and-press-releases/majesco-entertainment-company