New pilot at Virtual Spectator

By CHRIS BARTON it editor

Endeavour Capital has bought the business of Virtual Spectator for an undisclosed sum and plans to rejuvenate the struggling local dotcom by increasing its subscription revenue.

The venture capital company headed by Neville Jordan takes control of the assets and 15 staff of Virtual Spectator and will operate as Virtual Spectator International, a subsidiary of Endeavour Capital.

"We wanted to take over and refocus on doing fewer things better," said Jordan.

Casualties are the company's fledgling music business with UK pop band Simply Red and efforts to expand into coverage of UK soccer.

Both were discontinued this year.

Three staff have been made redundant and two others will continue to work for the company as independent contractors.

Chairman Lindsay Fergusson, who stays on as executive chairman, said some debt owed mainly to investors remained but this would be "washed-up" when Virtual Spectator and its United States holding company were closed.

Craig Meek stays on as executive director of business development and newcomer Darren Green will be general manager.

Jordan said the business would now focus on providing internet coverage of the Louis Vuitton and America's Cup programmes that started in October, and would continue to provide internet and TV coverage of the World Rally championship.

He said the company was negotiating subscription revenue sharing and marketing deals with internet providers around the world.

Revenue from Virtual Spectator's TV animations for the America's Cup and challenger series, plus animations for golf and cricket events, now goes to former investor Animation Research, which this year paid Virtual Spectator a one-off software licence fee.

Ian Taylor, managing director of Dunedin company Animation Research which had held a 19 per cent stake, will become a director of the new company.

He said he was pleased by Endeavour Capital's investment.

"It's great to see someone like Neville taking over the company to bring a focus that may not have existed before."

Jordan said the new company was exploring opportunities other than sports cover with Animation Research.

Listed company IT Capital, which had up until December invested $7 million in Virtual Spectator for a 23 per cent stake, told the stock exchange yesterday that it had quit its investment, but this would make no difference to its financial position.

"IT Capital felt Virtual Spectator's previous business model made it difficult to sustain the then high monthly cash burn rate," the company said.



IT Capital had supported a restructuring of the company that would have diluted shareholdings to introduce fresh capital. But that was not acceptable to some of the other shareholders.

In February, IT Capital wrote off its entire investment in Virtual Spectator as part of its forecast $20 million dollar loss for its March year.

Its writedowns of $9.715 million included its investments in Golden Orb, Terabyte and Virtual Spectator.

Virtual Spectator is believed to have spent about $15 million of investors' money since it was formed in April 1999, as it struggled to build revenue from its coverage of sports events.

The business grew from the last America's Cup, when Virtual Spectator provided 3D animations of the races using live positional data transmitted from the yachts.

This service was then offered on the internet and expanded to include rally car racing.

But revenue from subscriptions to watch races over the internet have been slow in coming.

For the year to March 2000, Virtual Spectator had sales of $2.38 million and had a loss of $3.2 million. Last year its revenue shrank to $800,000 and its loss ballooned to $4.7 million.

Investors in the company included US venture capital firm Snider Capital (19 per cent), Lindsay Fergusson (14 per cent), One World Sport International (6 per cent) and Craig Meek (5 per cent).

Jordan founded MAS Technology which listed on the Nasdaq in 1997 and was bought out by Digital Microwave a year later, leaving him with $60 million.

Since then he has been invested in companies such as Protemix, Doctor Global and QED.