The reports are in, and they do not look optimistic: Motorsport Games has made its Q2 2023 Earnings Report public, which presents a bleak outlook on the company's future. MSG might not even see the end of the year - what does that mean for the licenses of racing series it holds?
Image credit: Motorsport Games
As Motorsport Games is listed on the NASDAQ, the company is required to publish reports about its finances for each quarter of a year. Naturally, this contains good amounts of complicated financial terms and legalese phrases - we want to spare you these, but if you are interested to read everything in detail, you can find the full report on the Motorsport Games investor relations website.
CEO Stephen Hood highlighted positive events of Q2 2023, such as the announcement of Le Mans Ultimate and key updates to rFactor 2. Suprisingly, the Next Gen Car Update DLC for NASCAR Heat 5 was also mentioned as a highlight due to it being "on track to become our most downloaded content update" - which is surprising, considering that Heat 5 is the predecessor to NASCAR 21: Ignition. The latter saw an issue-filled launch in late 2021, and the Next Gen Car DLC has been received overwhelmingly negative with users reporting the update to remove features or not work at all.
The Next Gen Car Update DLC for NASCAR Heat 5 was received overwhelmingly negative. Image credit: Motorsport Games/704 Games Company
As a result, "the Company does not believe it has sufficient cash on hand to fund its operations for the remainder of the fiscal year 2023 and that additional funding will be required in order to continue operations". Options like equity or debt financing arrangements, selling licenses or company assets and "further cost reduction and restructuring initiatives" are being explored, according to the report.
A dedicated IndyCar game is among MSG's projects - will it ever see the light of day? Image credit: Motorsport Games
As was rumored recently, the NASCAR license is most likely on its way out from Motorsport Games - the company's most recent filing with the Securities and Exchange Commission (SEC) all but confirms this. The sale of the NASCAR license is mentioned as one of the ways to reduce the financial problems the company is facing, and MSG is "currently in discussions with a third-party for the potential sale of the NASCAR license". The document also confirms that the development of all potential future NASCAR games under Motorsport Games has been "put on hold indefinitely."
Since the problematic NASCAR 21: Ignition launch, Motorsport Games only released the Switch-exclusive NASCAR Rivals in 2022 using the license. Meanwhile, the planned-for 2022 BTCC game never materialized, with rFactor 2 seeing the release of BTCC DLC instead. rF2 and developer Studio 397 are part of Motorsport Games, hence the connection.
Le Mans Ultimate is still expected to launch in December of 2023. Image credit: Motorsport Games
So, what does all of this mean, then? Briefly summarized, MSG expects Le Mans Ultimate to be released in December as originally planned, but with more pressing issues at hand, all other projects seem to be on hold indefinitely. The chances of an IndyCar or BTCC game seeing the light of day under Motorsport Games look to be rather slim, to put it mildly.
What if the company goes bust before then, though? While this might delay LMU, it is hard to imagine Studio 397, the Le Mans Ultimate project and rFactor 2, which it is based on, not getting picked up by another party. The respective series might also terminate the licensing agreements - which could open the door for the return of the iRacing Indy 500 special event, for example. The race had to be left off the calendar for 2023 due to the exclusive license being with Motorsport Games. Meanwhile, Reiza Studios had to resort to a semi-fictional version of a 2023 IndyCar for Automobilista 2 instead of being able to license an actual Dallara IR-18.
Image credit: Motorsport Games
As Motorsport Games is listed on the NASDAQ, the company is required to publish reports about its finances for each quarter of a year. Naturally, this contains good amounts of complicated financial terms and legalese phrases - we want to spare you these, but if you are interested to read everything in detail, you can find the full report on the Motorsport Games investor relations website.
CEO Stephen Hood highlighted positive events of Q2 2023, such as the announcement of Le Mans Ultimate and key updates to rFactor 2. Suprisingly, the Next Gen Car Update DLC for NASCAR Heat 5 was also mentioned as a highlight due to it being "on track to become our most downloaded content update" - which is surprising, considering that Heat 5 is the predecessor to NASCAR 21: Ignition. The latter saw an issue-filled launch in late 2021, and the Next Gen Car DLC has been received overwhelmingly negative with users reporting the update to remove features or not work at all.
The Next Gen Car Update DLC for NASCAR Heat 5 was received overwhelmingly negative. Image credit: Motorsport Games/704 Games Company
Will MSG See the End of the Year?
The most interesting part of the Q2 report, however, is the Cash Flow and Liquidity section. These are the key statements of the report, informing about losses of $8.9 million in the first six months of 2023, leaving the company with "cash and cash equivalents" of $2 million as of June 30th - which have been further reduced by $1.4 million as of July 31st.As a result, "the Company does not believe it has sufficient cash on hand to fund its operations for the remainder of the fiscal year 2023 and that additional funding will be required in order to continue operations". Options like equity or debt financing arrangements, selling licenses or company assets and "further cost reduction and restructuring initiatives" are being explored, according to the report.
A dedicated IndyCar game is among MSG's projects - will it ever see the light of day? Image credit: Motorsport Games
As was rumored recently, the NASCAR license is most likely on its way out from Motorsport Games - the company's most recent filing with the Securities and Exchange Commission (SEC) all but confirms this. The sale of the NASCAR license is mentioned as one of the ways to reduce the financial problems the company is facing, and MSG is "currently in discussions with a third-party for the potential sale of the NASCAR license". The document also confirms that the development of all potential future NASCAR games under Motorsport Games has been "put on hold indefinitely."
Since the problematic NASCAR 21: Ignition launch, Motorsport Games only released the Switch-exclusive NASCAR Rivals in 2022 using the license. Meanwhile, the planned-for 2022 BTCC game never materialized, with rFactor 2 seeing the release of BTCC DLC instead. rF2 and developer Studio 397 are part of Motorsport Games, hence the connection.
BTCC & IndyCar Games Doubtful
The simulation's engine is also the framework for the upcoming Le Mans Ultimate, which is scheduled for release in December 2023. According to the SEC filings, Motorsport Games still expects this to happen, but crucially states that "the Company is evaluating its ability to deliver new titles under its other licenses, such as with INDYCAR and the British Touring Car Championship (the "BTCC"), which may result in further adjustments to the Company's product road map".Le Mans Ultimate is still expected to launch in December of 2023. Image credit: Motorsport Games
So, what does all of this mean, then? Briefly summarized, MSG expects Le Mans Ultimate to be released in December as originally planned, but with more pressing issues at hand, all other projects seem to be on hold indefinitely. The chances of an IndyCar or BTCC game seeing the light of day under Motorsport Games look to be rather slim, to put it mildly.
More Licenses to Move?
Could these projects still be realized eventually? It is certainly possible if other companies step in and purchase the relevant assets - the question is if anyone would be willing to do so. Should MSG be able to complete the sale of the NASCAR license, it might give the company enough of a boost to at least survive the rest of 2023 and release Le Mans Ultimate as planned.What if the company goes bust before then, though? While this might delay LMU, it is hard to imagine Studio 397, the Le Mans Ultimate project and rFactor 2, which it is based on, not getting picked up by another party. The respective series might also terminate the licensing agreements - which could open the door for the return of the iRacing Indy 500 special event, for example. The race had to be left off the calendar for 2023 due to the exclusive license being with Motorsport Games. Meanwhile, Reiza Studios had to resort to a semi-fictional version of a 2023 IndyCar for Automobilista 2 instead of being able to license an actual Dallara IR-18.
