NASCAR is trying to find a new home for its video game license.
Since its launch in October 2021, NASCAR 21: Ignition has been widely panned for being a game that shouldn’t have been released when it was. The game launched in such a broken state with countless bugs and numerous missing features than many felt were basic inclusions — stage racing, anyone?
Now, with the game still not in what many view as an acceptable state and things looking rough financially for Motorsport Games, NASCAR is trying to find a way out.
Multiple sources have told SGO that NASCAR is actively looking for ways to get out of its current agreement with Motorsport Games. The sources say that NASCAR would like to bring its license to a different publisher and developer within the next couple of years.
“NASCAR isn’t happy,” the source said. “There’s a reason they don’t even promote their own game on any broadcasts. It’s because they don’t want to be associated with a game as broken as what NASCAR 21 is.”
A Problem With NASCAR’s Plan?
While NASCAR may want to get out of the agreement, it’s not going to be that easy. It’s not a case of one side just deciding to cancel and move on. NASCAR is going to have to — and has been working on — building up a case to present to warrant early termination.
While Motorsport Games will simply point to the existing agreement that expires late in the decade and use reasoning such as the transition to a brand new game engine for the problems with NASCAR 21: Ignition, NASCAR itself will have to present more than that.
For them, they’ll look at the fan response to the game, the finances of Motorsport Games, and the questionable future of the publicly traded company.
Since October 20, 2021, about the time when reviewers first started to get copies of NASCAR 21: Ignition in their hands, shares for Motorsport Games (MSGM) have plummeted. On October 20, they were trading at $15.59. As of closing on April 14, shares were trading at just $1.20, a drop of 92%.
In the company’s recent fourth quarter earnings call, it was revealed that, despite all of the licenses currently held such as NASCAR, IndyCar, and more, Motorsport Games continues to lose money. In 2021 alone, the company reported a total year loss of $33.16M. After taking into account a few sources of income such as stock based revenue, that number improved a bit, but the company still posted a loss of $17.4M.
For the fourth quarter alone — the time window where NASCAR 21: Ignition was released — net losses sat at $7.0M compared to $3M from the same time in 2020. And this is despite revenues being $8.2M for fourth quarter 2021 compared to $2.9M from 2020.
During the investor call, the company admitted to having just $12M in cash on hand with a monthly cash burn of $1.7M. At its current state, Motorsport Games just doesn’t have enough to stay afloat long term, meaning that it needs more investors to come in to help mitigate the losses and reduce the burn percentage.
Even the company stated that there’s doubt in its future without extra funding, giving NASCAR possible leverage to end the agreement.
“While our 2021 Form 10-K indicates a doubt about our ability to continue as a growing concern, we’re currently evaluating new sources of funding,” Motorsport Games CEO Dmitry Kozko said on the call.
Chief Financial Officer Jon New threw gasoline on the fire when he stated there would be no forward guidance (an estimate on next quarter or next year revenue) provided on the call.
“We do not believe that our existing cash on hand will be sufficient to fund our operations for the next 12 months,” New said.
What About NASCAR 22?
With this situation currently ongoing, sources close to the situation insist that development of NASCAR 22 is continuing. The current plan is to release in late summer, and that is what the development team is working towards.
“Until the team is told there’s no more game, they are working under the impression that things will continue as normal,” one person said.
Another added: “If it ends, it might take enough time that there should still be one more NASCAR game under Motorsport Games.”
SGO has reached out to both NASCAR and Motorsport Games for official comment on this report. So far, neither party has returned those requests.
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