Friday, June 27, 2008

IRacing hopes for win with online racing sim

By Christopher Calnan

After nearly four years of development, Bedford-based iRacing.com Motorsport Simulations LLC launched last week its online racing game, one that company officials plan to grow into a full-fledged online sport. With backers that are established winners in both games and sports, the company could be in the fast lane.

IRacing, established in 2004 by Red Sox owner John Henry and NASCAR racing game developer David Kaemmer, completed a beta test this week and is now sending invitations to 5,000 prospective subscribers. After operating for four years without a revenue source, company CFO Anthony Gardner said iRacing is hoping to reach cash positive status next year.

Backed with $22 million in seed funding from Henry and Kaemmer, who was co-founder of Papyrus Design Group Inc., Gardner expects to avoid the need for additional rounds of financing. The online technology company already claims 20,000 people on its waiting list, and Gardner expects it to evolve into a full-time racing organization.

“It’s not a game,” he said. “It’s Internet racing. We’re trying to take real racing and bring it online.”

IRacing’s developers created software that generates digital versions of real-life race tracks and vehicles. Using lasers, the company scans tracks and vehicles to duplicate the racing experience in a process that can take up to five months for a single track, Gardner said.

The iRacing software currently shows 24 tracks and eight vehicles, he said.

The online game — or sport — will require members to pay a $13 per month fee in addition to the cost of controllers that could run to several hundred dollars. The technology enables drivers to earn an “i rating,” depending on how they place in races, and then match up against other drivers with similar ratings in subsequent races.

Competitors include London-based Blimey!Games, Michigan-based Image Space Inc., Indiana-based Sim Factory LLC, and European firm Live For Speed.

Kaemmer, both a real-life racer and a 20-year game developer, founded Papyrus in 1987 with business partner Omar Khudari. In 1995, game publisher and developer Sierra On-line Inc., a division of Vivendi Universal Games International, acquired Papyrus for $40 million following Papyrus’ development of its string of genre-defining racing games.

In 2004, Vivendi Universal shut down Papyrus’ operations, but iRacing paid $1 million to buy back the “core simulation” code, which now comprises about 15 percent of iRacing’s total code, according to Kaemmer.

The company has enough capital to fund operations for at least a year and may never need additional funding, Gardner and Kaemmer said. But the company is considering angel investors just in case.

“There are a lot of wealthy people in motorsports,” he said. “They would have a better appreciation and interest in what the company is doing.”

Last year, Henry’s company, the Fenway Sports Group, bought 50 percent of the NASCAR team Roush Racing, which was then re-named Roush Fenway Racing.

Alex Martini, editor-in-chief of AutoSimSport Magazine, a New York-based online publication devoted to sim racing, estimates about 100,000 sim racers participate globally. It’s unclear if the market is growing, but he said Henry’s investment in iRacing is a strong indicator that sim racing is not a passing fad.

“He’s not in it to throw money into the wind,” Martini said. “I’m sure he sees a market there.”