Monday Memo: Going back to Dallas

Monday Memo:

As always, if you’re more into PDF & printable formats, today’s memo can be found here.

Today, we’ll recap some observations & thoughts over the past week in Dallas, TX and St. Louis, MO.

Pickleball Business Forum

On Tuesday, we had the chance to attend the Pickleball Business Forum at Brookhaven Country Club during Nationals. From an event perspective, it was well-organized, catered, and structured. We’d love to see future events targeted at sub-verticals of the pickleball industry, such as a day of paddle companies, day of facilities, day of media businesses, etc., and something we’re considering putting together next year.

The biggest general critique was the sometimes excessively high levels of exuberance that were rarely contested by the moderator or other panelists. In our opinion, being analytical and thoughtful about pickleball’s shortcomings doesn’t take away from how exciting and lucrative of an opportunity this entire space is. Hearing over and over again about how the train can’t be stopped, how early we are in the growth cycle, and how no-brainer of an investment every segment of pickleball is feels rather uncritical and creates the conditions for pickleball to look more like a bubble than a burgeoning industry that will be here for our children and grandchildren to build social connections at the rec level and aspire to at the pro level.

Some themes and our views:

Influencers and Brand Engagement

The Key Points:

• Pickleball influencers can tailor their content to specific subsets of the market who find their unique brands attractive —> creates more opportunities to find product-market-fit for these creators.

• Unanimous agreement that influencers and traditional brands moving into pickleball must develop an authentic voice. For individual creators like Tyson Apostol, this means they don’t have ‘social media managers’, as you risk losing authenticity over time.

• Usage of celebrities for legacy corporations is meant to grab a viewer’s attention even for a short period and associating the feeling they have with that celebrity with pickleball & the company.

Our Views:

• Social media has created opportunities for content creators and influencers to gain an audience & distribution, however, the bulk of returns (by any metric) tend to concentrate around a few —> creates a long-tail distribution of returns for most.

• Influencers are in a unique section of the market, as it’s nearly a completely free market, which allows creators to find and target niche demographics with content directly relevant to them. This creates some level of staying power for those who are successful, as the loyalty of the viewer is with the individual personality.

• Content creators are far more responsive and seemingly thoughtful about the type of content they put out, as the switching costs for a consumer are very low if they lose interest or find a more compelling alternative.

• It feels like the lift for a big brand to roll out a pickleball product line is often pretty low —> which incentivizes additional companies to try to capture the surge in consumer demand. We’d like to see more permanent capital investments in the space to demonstrate some level of commitment to the future of the sport, rather than just hopping on the latest trend - most facilities are an example of this, as there is a considerable amount of time and resources put into bringing these things to life.

• Distribution is one of the biggest uphill battles for new content, as there aren’t go-to platforms for consumer discovery of new independent media. We know this from firsthand experience trying to distribute a new form of content in pickleball business news & analysis…

Player Brand Development

The Key Points:

• The #1 way for a player to become the best spokesperson for a brand is to win and be excellent at your craft.

• After winning, there are levels of personality, skills, and storylines that can make players particularly marketable.

• Like influencers, it’s challenging for players to manufacture a brand that isn’t authentic to who they are. Authenticity goes farther with fans & consumers and is more attractive to sponsors than trying to be someone you’re not.

• Professional leagues can lean into programming designed to help bring players into the spotlight, which in turn helps promote the sport. Tennis utilized programming that brought stories of players from off the court into the lives of viewers. This helped create greater fan engagement with the sport, but also helped turn players into stars.

Our Views:

• There are numerous brands out there that are very calculating in their sponsorship strategies, so it’s more worthwhile for a player to stay consistent in their image to attract the right brand, rather than faking a persona that they hope will land a specific sponsor.

• Ben Johns vs. Tyson McGuffin have both curated specific brands that have some overlap in their pursuit of excellence on the court, but through different demeanors that will be attractive to their own set of sponsors and fans.

• Until more traditional media leans into the space, it is on players, MLP teams, and sponsors to create and distribute the stories of some of these remarkable players.

Facility and Court Construction Opportunity

The Key Points:

• Opportunity for MLP teams to lean into facilities in their local regions to create a new line of business and connect with their fans.

• Cities aren’t building public courts quickly enough to provide ‘free’ alternatives —> creating private market opportunities.

Our Views:

• Not much new to comment on here - seemingly unanimous agreement that the biggest opportunity in pickleball continues to be in court construction at the private facility level. We’ve been vocal proponents of MLP teams developing their own ‘home stadiums’ in their local markets to draw MLP tournaments to their city, but more importantly, to build community and a fanbase among locally addicted pickleball players.

• Demand outstrips supply in almost every region, and initial startup costs, regulatory hurdles, and proper real estate availability are slowing the pace at which new facilities can come online. This creates some lag time between when a group begins their investment process and when they open the doors —> risks leading to an oversupply of courts in the medium- to long-term as more supply comes online. New facilities will need to be thoughtful about where they are placed in the market and what will make their courts different than just concrete in a box with lines on them.

• Court construction companies are the biggest winners. Go try to chat with your local court installer and see how big their backlog is…it’s often quite impressive.

Paddle & Equipment Markets

The Key Points:

• Nearly 400 new paddle brands on the market this year.

• New services coming online to help new paddle companies prototype configurations & materials.

• Material innovation coming along 4 spectrums:

  • Shape

  • Raw material

  • Power & control

  • Spin & texture

• Some companies believe the future of the sport for rec players will require a quieter game.

  • Spurring investment in balls that reduce the sound by 50%

  • New paddle designs that affect not just the decibels (i.e. ‘loudness’), but also the pitch of the sound

• Paddle demo programs are a great way to get new players moving up the paddle price point spectrum as they become more advanced players; Branding also helps with the perception of an elite playing experience

Our Views:

• Paddle space is one of the most competitive and innovative sections of the market.

• Few entrenched players create a nearly free market for dozens to try their hand at new technology and branding as a way to gain a foothold and win over players.

• Right now, some of the biggest winners are the materials suppliers who could shift their supply chains to provide for the ever-increasing number of paddle companies in the market.

• Opportunities are being created for established paddle companies or investors to build a portfolio of paddle assets and standardize their marketing, R&D, and distribution costs.

• While we remain negative on the push to deaden the sound of pickleball paddles & balls, we continue to support the research, development, and distribution of better planning for pickleball court locations, as well as the infrastructure to create quieter experiences for local neighbors. Our extended thoughts can be found here.

Merger and Media Opportunities

The Key Points:

• Merger will reduce the risk of cannibalization and division of viewers between the two competing leagues as all players will be able to play in both formats.

• Tennis has struggled to break into the top revenue-generating sports due to the fracturing of the 7 governing bodies competing against themselves.

• Executive teams at the leagues feel strongly in creating ‘tentpole events’

  • E.g. U.S. Open of tennis, Kentucky Derby, Masters golf events

  • Tentpole events create brands and clout, which draws players and fans who want to be seen at the events, and ultimately stardom for the winners; As an athlete, you can have one big win at one of these events, and regardless of future performance, you can ink lucrative deals and still be talked about as a top player.

• Invited Clubs & PPA attempting to build a tentpole event out of Nationals in Dallas —> spent $5M+ to renovate and construct Brookhaven Country Club for this event.

Our Views:

• May be tough to believe Tennis Channel when they say they don’t plan to replicate tennis for pickleball as it won’t translate well, yet one of the case studies for the ‘tentpole events’ is to base it off the U.S. Open.

• It’s a little unclear how the ‘tentpole’ strategy will work for team-based events & sports like MLP. The quick reaction is that the Superbowl, Stanley Cup, NBA Finals, World Series are all ‘tentpole’ events for these team-based sports, but we think that’s too flat of a view. These ‘tentpole’ events are the culmination of storylines and weeks of loyal fandom throughout a whole season that, if your team is lucky, leads to a single event - rather than a bespoke event where there is little attention paid to the tournaments & road leading up to that event (e.g. people watch the U.S. Open in isolation, but not the Cincinnati Open leading up to it).

• On the media side, credit to The Dink for identifying the market they’re going after and being far more responsive and curated than Tennis Channel in understanding their audience. While it’s infeasible with the current contracts in place, it would be interesting to see a company that has grown up in this world try their hand at live broadcasting.

• One interesting area that they seemed to hint was the potential utilization of sideline announcers. We’d be supporters of testing this, as we think a mutli-cast view could help casual viewers get a better understanding of which shots are challenging and impressive. People who don’t play frequently sometimes struggle to realize the intricacies of what is going on during a point…especially if you could get live reactions of the announcers like UFC does…

PPA Nationals

It was hard to get a sense of how PPA Nationals turned out from an event perspective as we only saw setup and then did a few walkthroughs on Tuesday before the major crowds descended on the facility for the weekend pro + amateur play. However, it’s safe to say that the online pickleball forums haven’t spoken highly of the experience. Some of this is understandable when you’re experimenting with a new massive concept to host 3k+ players & fans. But when even USAP is putting out a statement that the event “did not meet their standards” and is taking ownership of the shortcomings, we know things didn’t go swimmingly. This is despite over $5M in investments made in the venue for the week-long event. Honestly, we don’t have too strong of a take for how to ‘fix it’. It’s clearly an insane logistical challenge to handle 3k+ players of different age groups, who are there for different purposes, and most of the event taking place in some sort of outdoor setting with space constraints. The obvious comment is that there are no doubt plenty of learnings to improve upon for next year, particularly if PPA hopes to lean into their ‘tentpole’ strategy of events.

Missouri Pickleball Club

If you find yourself in St. Louis, you need to stop into MPC. It’s one of the most well-designed facilities we’ve come across, and their years of experience building a successful community and member experience speaks for itself. The club was opened in early 2020, so it’s a veteran as far as private indoor facilities go, and is planning to expand to another facility in the same market. The team under the ownership of Michael Grewe was very knowledgeable, extremely hospitable to us as guests, and has stuck true to their brand and what pickleball ‘is’ in their local market. They’re willing to experiment with new offerings to bring in a best-in-class pickleball training program through the use of Senaptec training systems to improve player performance. If you ever have a chance to play pickleball with Senaptec’s strobe light glasses, you’ll be pretty shocked at your improvement in reaction time. We want to better understand the science behind it, but from the conversations we’ve had from people familiar with the technology, it seems to produce improvements in reaction times, cognitive processing, and vision. These types of systems are intriguing to us as clubs look to differentiate from one another and some build their brand around high-performance pickleball training for amateur & pro players alike.

MLP Dallas

Honestly not too much to add from our commentary on the Atlanta event. Some elements felt like they were still getting things together (they were), but they did a pretty good job considering the venue location was moved from Thousand Oaks a few weeks before. Now that there’s incremental clarity on the combined entity compared to a few months ago, this should help with the planning and organization of future events. Will save thoughts and any perspective for another day if there’s something meaningful to add. We still had a great time meeting so many fans, people in the industry, and friends at the event and look forward to the next one.