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Indianapolis Business Journal
VOL. 22 NO. 32, OCTOBER 22-28, 2001

Ex-IMS Official Goes Mall Racing
Donaldson buys virtual race centers, plans new units here, in other markets

By Anthony Schoettle, IBJ Reporter

Despite departing his powerful post inside the Indianapolis Motor Speedway four years ago, Bill Donaldson still races in the motorsports industry’s fast lane.

Donaldson recently formed a new company, Perfect Line LLC, and bought the assets of Campbell, Calif.-based Silicon Entertainment Inc., which operated the NASCAR Silicon Motor Speedway Racing Centers in malls across the country.

Donaldson is already laying groundwork for ambitious expansion plans, including opening a race center in Indianapolis. He’d also like to take the company public to fuel growth.

Yet industry insiders said Donaldson has a firm grip on the new company and won’t take the same white-knuckled approach that drove Silicon Entertainment into bankruptcy in April.

“This is a large property to take on, but Bill has the vision, talent and organizational skills to make this happen,” said Kevin Davey, who worked with Donaldson at IMS and is currently president of Indianapolis-based Radius, a sports licensing firm. “Bill is a savvy businessman who has been in motorsports a long time.”

The racing centers—about 6,000 square feet each—consist of eight to fourteen NASCAR race car simulators set up on hydraulics. They have three large screens in front and along the sides of them to give customers what racing insiders call the closest experience to real racing. A nine-minute race against others in the center costs $8.50. The stores also sell a variety of NASCAR-licensed products.

Though Donaldson declined to say what he paid for Silicon Entertainment’s assets, industry insiders say he bought them for a song. Five years ago, SMS Racing Centers opened amid much fanfare and backing from NASCAR series and team officials, including Jeff Gordon and Dale Earnhardt. At the time, Silicon Entertainment estimated its initial investment in the $45 million to $60 million range, which included vast amounts of computer hardware, proprietary software and the cars, which are 80 percent the size of real race cars.

At its peak, Silicon Entertainment operated 15 race centers.

A Chapter 7 trustee for the U.S. Bankruptcy Court in San Jose, Calif., where the case was filed, said it’s difficult to tabulate the exact amount Perfect Line paid for the assets because several banks that had liens on the property were involved. But he estimated it in the “low seven figures.”

“A lot of money and effort was put in this,” Donaldson said of the racing centers’ initial launch five years ago. “In a Chapter 7 situation, we obviously got a good price on the assets.”

Perfect Line began reopening race centers in July and now has nine in operation at major malls in Bloomington, Minn.; Atlanta; Los Angeles; Houston; Charlotte, N.C.; Birmingham, Ala.; Grand Rapids, Mich.; Albany, N.Y.; and Nashville, Tenn. Perfect Line plans to reopen four more centers by year’s end, including one in Chicago.

Enthusiastic mall operators are already reporting lengthy lines and three- to four-hour waits to use the simulators since Silicon Motor Speedway’s reopening about three months ago.

“A lot of people come to the mall just for that store,” said Mace Hirt, general manager of the Katy Mills Mall in Houston. “It’s a unique store because it’s rare to find anything like this in the city, so it does very well.”

The Silicon Motor Speedway gained almost instant popularity when it first opened in Nashville’s Opry Mills Mall, said Joe Szymaszek, the mall’s vice president and general manager, and after it closed there was a flood of customer questions about its potential reopening.

“They are one of the most successful tenants from a sales performance standpoint,” Szymaszek said.

Donaldson said most of the racing centers were profitable, but Silicon Entertainment’s high overhead crashed the company. He intends to keep Perfect Line’s front office lean and raise revenue at the centers through increased group sales and merchandising. Perfect Line currently employs about 65, including those operating the nine race centers. Donaldson was able to retain about 75 percent of managers and other key personnel that previously operated the centers.

If anyone can push the sale of SMS’ licensed product sales, it’s Donaldson, said industry sources. In 19 years with the Speedway, Donaldson served as president of IMS Properties and IMS Events, creating a new generation of sales and marketing opportunities.

Donaldson established the Speedway’s licensing programs, served as its supervisor of domestic and international radio and television broadcast properties, and was instrumental on the executive board that launched the Brickyard 400, Indy Racing League and Comfort Classic at the Brickyard, a Senior PGA Tour event.

Donaldson left the Speedway in 1997 and formed Donaldson Group International Inc., an Indianapolis-based company that specializes in event management, marketing, consulting and merchandising. He also has served as executive director of the American Le Mans Series, a sports car race series, since its inception three years ago.

Industry sources said Donaldson bought Silicon Entertainment’s assets only after careful consideration of the venture’s total potential, including malls where SMS centers were located, the current climate of NASCAR including merchandising, marketing deals and television contracts, and a gauge of how Wall Street might respond to such a venture.

“They’ve combined all the right elements for success,” said Davey, who visited Silicon Motor Speedway Racing Center’s Chicago location when the concept launched in 1997. “When Bill sizes up a deal like this, he has to size up what’s going on with NASCAR.”

Many NASCAR properties are already lining themselves up with Perfect Line. Donaldson has been able to secure licensing deals with tracks in Daytona, Fla., Charlotte, Atlanta and Richmond, Va. The simulator can mimic those tracks down to landscaping and billboards, Donaldson said. And licensing deals also have been renegotiated so replicated cars of NASCAR’s most famous drivers can be used. Donaldson said more licensing deals are in the works.

NASCAR officials have thrown their weight behind the project, and think Donaldson is the right person to help them further their brand.

“One of our fundamental goals in NASCAR is to have unique ventures that help bring fans closer to the sport,” said Blake Davidson, NASCAR director of licensing. “This is a perfect example of that.”

One of the reasons NASCAR officials are high on Donaldson is their belief that he will dramatically increase the sale of licensed merchandise.

“Bill has a very keen eye to the merchandise aspect of Silicon Motor Speedway,” Davidson said. “On the technical side, he’s assembled the right team. They’re not missing a beat. Already, we’ve seen lines out the door at the mall in Charlotte and at the Mall of America in Minnesota.”

Despite optimism from many corners, Donaldson remains realistic about expansion plans. Unlike Silicon Entertainment, which proposed opening 20 to 30 new racing centers within two years, Donaldson projects opening one or two new racing centers in each of the next two years while perfecting the stores and expansion blueprint. After that, he said, an initial public offering could accelerate SMS’ growth.

“We will find a way to get this up and trading one way or another,” Donaldson said. “We think that’s a good way to get it funded for expansion. It’s a good model for public funding. It’s scaleable. If it works in nine markets, it will work in 50 markets.”·

E-mail: aschoettle@ibj.com