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Majesco replaces CEO, slims down to five employees amid shift to digital games

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Ailing publisher Majesco Entertainment has appointed a new CEO, and is shifting away from producing retail games and toward a digital future in an effort to become profitable, the company announced today.

Outgoing CEO Jesse Sutton, who had held that role since December 2007, wrote in a letter to shareholders today that Majesco has made efforts to cut costs by reducing staff and getting out of the retail video game business.

"With the rapidly changing landscape of connected gaming, we have faced increasingly challenging market conditions while watching the high risk retail gaming business diminish in importance," said Sutton, adding that Majesco "has reduced its exposure to the retail market with a renewed focus on the download gaming business, which has come to dominate the market."

Majesco will now focus exclusively on downloadable and mobile titles, including a game called Glue and a new entry in the A Boy and His Blob series, both of which the company expects to launch within the next two fiscal quarters. (Majesco's fiscal year runs from Nov. 1 to Oct. 31.) Those two games will be released on "all next generation consoles and in some cases, PC," said Sutton.

"We have reduced our headcount dramatically, and our cash burn, in order to focus on the download business, which is essentially a royalty business where games are downloaded from servers maintained by game companies, such as Valve, Microsoft, Sony and Nintendo," Sutton continued, noting that Majesco currently has only five full-time employees. That's down from 16 in January, as the company reported in a filing with the Securities and Exchange Commission.

"As we adjust to our new business model, we expect that our future quarters will be breakeven to profitable. We continue to explore new distribution channels and are working with developers to increase these numbers and further reduce costs," said Sutton.

Sutton resigned July 27, and Majesco appointed David Rector as its new CEO and chairman of the board. In exchange for Sutton's resignation and waiver of severance payments, Majesco spun out its retail business into a new subsidiary called Zift Interactive that is owned by Sutton. Under the terms of the agreement between Majesco and Sutton, he will serve as a consultant to the company regarding its digital games business for the next two years.

Majesco has been in dire straits for more than a year now. The company has flirted with being delisted from Nasdaq a number of times, and laid off employees of its indie publishing label, Midnight City, last fall. The label was set to publish console versions of Gone Home, but developer Fullbright confirmed in March that those ports are no longer in development. Midnight City's highest-profile title was Double Fine's Costume Quest 2, which launched in October.