Cup racing puts wind in Virtual Spectator's sails

By PETER GRIFFIN IT writer

Virtual Spectator is set to cash in on its internet exposure during the Louis Vuitton Cup and America's Cup racing by moving to the unlisted securities market and raising $1 million in funding.

Chief executive Greg Young said the company's debut on the largely unregulated secondary board was aimed at raising money from "habitual and professional investors" to complete the acquisition of an Australian company. He would not name the company but said the acquisition would "double the size of Virtual Spectator".

Industry sources speculate the target is TV sports graphics company Pineapplehead.

Virtual Spectator develops its 3D graphics mainly for web audiences but could use Pineapplehead's broadcasting experience to extend its graphics to TV viewers.

Pineapplehead, which is listed on the Australian Stock Exchange, has seen its share price slump to less than 4Ac from highs of more than 50Ac. Its market capitalisation is around A$2.2 million ($2.36 million).

However, a move into TV graphics could put Virtual Spectator at odds with Animation Research, the company that has the rights to use its feeds to supply TV graphics for sports ranging from the America's Cup to golf and cricket.

After an acrimonious split, Virtual Spectator and Animation Research drew up a contract in which they both vowed not to stray into one another's territory.

Yesterday, Animation Research beat Pineapplehead to a deal with the BBC, making it responsible for TV graphics for five major European golf tournaments.

Venture capital company Endeavour Capital bought a struggling Virtual Spectator last May, leaving behind in liquidation a company renamed International Networks, with unsecured creditors owed about $1.2 million.

While an estimated 150,000 people have viewed the Louis Vuitton and America's Cup racing through Virtual Spectator online, the company will not say how many subscribers paid to receive the service.

Subscription fees, with payments from sponsors such as software maker SAP and UBS Financial Services, provided Virtual Spectator's revenue from the racing.

Meanwhile, Young has been in London drumming up business for after the America's Cup. He said negotiations were under way to seal a "collaboration agreement" with a major British listed company.

Virtual Spectator was also in discussions with a video game developer to build a yachting game for the video game console market.

But the company's main focus over the next couple of years would be supplying online coverage of motorsports events, Young said. It may not be able to extend that to TV graphics, as the contract with Animation Research excludes motor sports.

Neither Virtual Spectator nor Animation Research believes a shift to Europe will harm their chances of providing animated coverage of the next America's Cup.

Young said Virtual Spectator's small European audience would only increase if the cup moved there.

"The sport will be better served by it being in Europe and that will help Virtual Spectator in delivering services to that event," he said.

Animation Research director Paul Sharp said the company had been involved in the cup for years and was experienced in negotiating with international broadcasters.

Virtual Spectator would also look to list on the AX, an "alternative" board the Stock Exchange is considering forming to replace the stagnating new capital market.

"We're waiting for the Stock Exchange to set the new date for the arrival of the AX," said Young. "We think it will be the third or fourth quarter this year before they get that together."