Pro Pickleball's "Vicariousness"

The Quick Points

🗣️ ACE gets to talking. Fun and short podcast with Diego Pacheco, the Chief Growth Officer of ACE Pickleball. A few comments that stuck out to us:

• Trampoline spaces are perfect for pickleball use as the ceiling height and column spacing align nicely.

• Private club pricing hasn’t centered around one driver; Price elasticity of demand is very local; For ACE’s first location in Roswell GA they are offering $129 per month for unlimited play

• “Biggest financial upside is tournament play” (Would love to unpack that with him as we believe tournaments can be a delicate balancing act to create the right environment…corporate events on the other hand…)

• Getting waivers from anchor co-tenants is essential but a fun challenge they welcome; Publix loves having an active population spending $129 / mo around their store.

• Ultimately, they’re only working with landlords that see the vision and believe in pickleball’s impact on a large local community

🦘 Ballin’ down unda. Franklin X-40 became the official ball sponsor of Pickleball Australia. We question how they’ll bounce in the Australian heat, but bad jokes aside, it adds further legitimacy to the national organization bringing pickleball to Australia as the sport grows in the country. It’s estimated that 25k people play pickleball in Australia today.

🏀 Bball to Pickleball. Miami Heat’s, Tyler Herro everybody.

What’s on our mind

Austin Ranchers corral big-name investors, while the NYT’s Dealbook questions pro pickleball’s ability to profit. 

🎉 First the congratulatory news. Austin’s own Texas Ranchers announced a new slate of investors, including Scottie Scheffler, Myles Garrett, Micah Parsons, C.J. Stroud, Bijan Robinson, Taylor Fritz, Zach Bryan, and Kendra Scott, among others. Big congrats to the team for bringing such an impressive slate of athletes and celebrities into the fold.

📖 Next, read this back-to-back with the NYT’s relatively negative outlook for pro pickleball. The Times highlighted how much they believe its success hinges on the sport’s ability to capitalize on television. In an interview with the former president of Turner (one of the largest sports broadcasting entities in the country), David Levy, he commented, “We don’t know whether pickleball is going to be a television event — if it’s not, there probably won’t be a lot of revenue attached to it. Sponsors want what? Reach and branding.”.

Their primary critiques:

• Other sports like Esports and ping pong have shown rapid growth at the consumer level, but struggled to gain a foothold at the professional viewership level

• Valuations for professional pickleball teams are reaching levels that make it difficult for the marginal investor to expect a realistic return

• Pickleball needs its own celebrity players, but risks not being the right format for television

💭 Now our thoughts. 

Let’s start with the Ranchers and MLP teams more broadly

Our initial views are that the Ranchers, and all MLP teams frankly, need to figure out how to activate their star-studded cap tables beyond the press release. As capital flows into the space, these teams are seeing increasingly higher valuations with each new private round, raising the bar for these professional teams to grow into their valuations. Yet, we haven’t seen concrete planning and execution beyond the belief that these celebrities can bring their marketing power to bear. If we were fundamental analysts looking for where the value for investors is going to be generated in the future, (excluding investments made for social signal or riding private market beta expecting someone else to jump in at a higher price), we’d have a few expectations of these teams:

1. Greater buildout and professionalization of these organizations
   While it’s still relatively early days for these team franchises, it would benefit many teams that lack formal personnel to grow their internal operations so they can start charting and executing a plan on how to create value for their players, investors, and fanbase. These won’t be overnight implementations, nor will they all be success stories on the first try, so having the infrastructure dedicated to working on this is necessary to create a professional organization and not a cocktail party investment.

2. Greater activation of talent to monetize local fans
   Beginning with the celebrity investor talent. It is more straightforward to assess how celebrity backing of consumer goods (apparel, food & bev, cars, etc.) helps to drive increased sales. Some consumers resonate with the signal provided by their favorite celebrity and then follow them all the way to the checkout counter. The customer acquisition cost can be more cleanly understood conceptually (though not always so easily quantified), and help illustrate where additional sales & marketing dollars may want to be scaled up / down. However, pro pickleball teams are already in an odd position when it comes to activating their celebrity talent. What are they activating users towards? Or said another way, what is the business of a pro pickleball team and how do fans help increase that business value? Is it getting them to watch more games? Is it getting celebrities to wear their team’s apparel? With the professionalization of these teams, we’d like to see them push their celebrity investors to get more actively involved. Bringing a name brand to the table is nice, but it won’t translate into true business value if they don’t take their name brand off the table and into the world.
   
   Now for the professional player talent. This one is a little tricky from a timing standpoint since teams were recently re-drafted. That re-draft cycle this year made it a little harder to build a repeatable activation process for their players, as a player was going to be off their team after the first season. However, as these teams have more stable rosters, they need to find ways to bring their players into their local markets to engage with fans and generate excitement around the team + sport. Some ideas could be community playing days, exhibition matches against celebrity investors, or clinics.

   
   Lastly, one of the best ways for a team to extend its runway without having to sell equity at increasingly higher valuations is by activating its local fanbase to spend money on the team. Teams that don’t develop their own monetization opportunities will be beholden to TV / streaming deals inked by MLP. While we believe there are some really exciting lanes for MLP to lean into to make a better viewing experience for what we believe is the most compelling pro format, the fact of the matter is that these massive cash cow networking deals don’t currently exist like in other sports. However, each MLP team can utilize their personnel to create new formats for their fanbases to get involved and spend money. With the right experimentation of activations, these teams can be the captain of their own ship while MLP figures out its TV / streaming opportunities. Pickleball is a local phenomenon, and if there’s anyone who is going to be able to resonate with these city’s pro teams, it’s going to be the passionate base of local pickleball players waiting for a way to get involved and a small push from the players & celebrity investors.

Now moving on to the NYT piece

We think they make a few interesting points that are worth considering, but also think some comments completely missed the mark. First, their comp to Esports is a tough one. While viewership in America isn’t ‘mainstream’, Esports viewership globally tops 500M. It brings in over $1bn in revenue globally - tough to call it a ‘failure’. Further, if you look into the revenue mix that’s largely relevant to something like pickleball, sponsorships lead the pack at $800M+, followed by media rights at $207M, and merchandise & ticketing at $107M. Not to mention, Esports has some unique headwinds that pickleball does not, as their ‘pro teams’ not only have to pick the right video games to compete in, but also make a thematic bet on which games consumers will find most popular to watch. Pickleball by contrast has one product for their players to compete in that its fans show up to watch.

The NYT’s discussion around pickleball being a less compelling TV format is one we wanted to read into more. So we found an interesting take from a podcast with Marcellus Wiley (former NFL defensive end). He made the pitch that despite his love of playing pickleball, it’s not a compelling television product because it struggles to be “vicarious”. That is, viewers are drawn to professional sports where they live through the athletes on TV. When a viewer watches an athlete do something that they can do recreationally, then it lessens the value of the viewing experience. Most pickleball players who watch it professionally know for a fact that the pros are better, however, the viewer isn’t seeing something radically different from what they do on a court (e.g. dink it, roll it, drop it, drive it). It’s clear they’re doing it much, much better than the average person, but is it both better and different in the eyes of the viewer. Most sports you can make this distinction - an NFL player being hit at full speed and getting up, an NBA player dunking over a 6+ foot tall opponent, an MMA fighter getting punched for a living, a bowler bowling a 275, a soccer player curving a ball, an F1 driver taking turns at >100mph, etc.

If his thesis is directionally correct, then the NYT’s bearish position on pro pickleball’s ability to monetize television has some merit. Nevertheless, we believe this creates a unique opportunity for the pro-streams to better engage with their audience either through on-screen visuals or commentary that help to convey how incredibly difficult and impressive the point they just watched was. Hands battles at the net are a unique opportunity to showcase not just how much better the pros are than the average rec player, but also the intricacies of how different their shot selection and split-second decision making is during exchanges - everyone gets into a firefight of volleys from time to time, but the ability to make the shots that the pros are making is, in our opinion, a prime example of the vicariousness that Marcellus was demanding.

This further encourages us to push the pro orgs (MLP, PPA, APP) to lean into new viewing formats. Assume for a second that Marcellus and the NYT’s position is true - then modeling your viewing experience off other sports whose athletes are demonstrating how much better they are at their craft and how different they can do it is not going to translate well for pickleball.

All for now, and we’re sure we’ll have more thoughts and perspective shifts as we continue reading and have convos with some of y’all who will undoubtedly be in agreement on some points and stark disagreement on others. We welcome all perspectives!

🗣️ Some rumblings. We have heard from several people this week that Minor League Pickleball may be no more. It comes as quite a surprise as we both have had positive personal experiences with the organization and weekends of fun competitive play with the format. We also believed it held a real future for revenue generation for local communities and their respective Major League franchises. It is all the more surprising this happens when the amateur experience across PPA and APP events is fine at best. Stay tuned for more.

🍿 We’ll be tuning in. The reddit thread, /r/Pickleball, is hosting an AMA with the Head of DUPR Analytics on Thursday, August, 24th at 2pm ET. If the comments section is any indication, we expect there to be thoughtful discussion, but also some spiciness.

🗓️ You know it’s early days. Let’s just say all of pickleball needs graphic design help when this is the standard. It feels like that confusing collage of no parking and street cleaning signs.

🎨 Paint those lines. A marketing manager for Sherwin Williams seemed to indicate they are doing an in-store pickleball promotion soon.

Breaking Ground

The Reset tracks publicly available court construction data to better understand the locations, costs, and development priorities going into projects across the nation. Our tracker can be found here.

Featured Developments:

Tucson, AZ is getting a new eatertainment facility, Corbett’s, which will reside in a 100-year old building. The location will feature 3 outdoor and 2 indoor courts, alongside the typical live music and restaurant offerings. The team believes they’ll attract a pickleball-centric crowd to play in the mornings, and then capture the upside of food & beverage by the afternoon + evening. We’ve heard of some eatertainment facilities lean into this strategy, where they utilize more traditional pickleball programming during less busy morning hours, and then shift towards events and typical food & bev by the evening. At the end of the day though, these are comp’d to restaurants first, so the ability to execute on the hospitality will be most important to make the math work with 5 courts.

Washington, IL opened 4 new courts to the public. It’s an important reminder for cities that these projects don’t always have to be funded by tax dollars, as 80% of the $268k project cost was funded through private community donations. Further, it’s not a set-it-and-forget-it asset for the city of Washington, as they plan to host organized tournaments and leagues at cost for their community - providing a payback mechanism for the city.

YMCA Pickleball in Downingtown. 25,000 sq feet with 9 courts. $60 per mo membership for YMCA members. $99 per mo membership for non-members. Showers and locker rooms. Already have 300+ paying members.

Best of the Rest:

• Orange County, FL is building 8 new pickleball courts at Downey Park.

• A massive $6.2M sports complex is being built in Cornelius, NC, which will boast 12 tennis courts, 12 pickleball courts, a baseball field, and two soccer fields.