[#43] The Pickleball Mania: Are there no other investment opportunities in sports?

Existing sectors are saturated, sports leagues & franchises have limited seats at the table, so maybe the opportunity lies in a new and growing sport; or so people think

Pickleball, & padel: New age racquet sports that seem to combine a bit of everything from tennis, squash, and table tennis, have almost overnight gained a crazy amount of popularity.

Full disclosure: I’m biased against it. I used to play tennis professionally (Top 5 in India, Top 200 in the world in U-18), so for me, tennis is still the top sport, among all the racquet sports out there. You can check out my journey in professional tennis below:

[#32] You're not a former anything, but a future something

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Out of all the racquet sports, tennis is probably the most technical. The baseline to get good enough to enjoy playing is pretty high, like golf. If you don’t have that basic technique and hours spent, you’re spending more time picking up balls than actually playing. And that’s what has contributed to the rise of Pickleball. The skill level needed to go out and have a good time, and a decent workout is fairly low. The court is smaller, the ball is slower, and it’s easier to control the paddle.

And I understand the value of the sport for community building purposes, exercise, and the fact that it takes less space, and is more inclusive. I was reading some stats: 1 tennis court can be converted to 3 pickleball courts → it’s more economical in terms of space, especially in dense, urban cities such as Bangalore & Mumbai. This is something that Djokovic has also expressed concerns about - that opportunities to play tennis will be at risk because pickleball courts are more economical to maintain

But what I don’t understand is the investment in this competitive aspect of this sport. I understand the real estate & infrastructure investment, but I would argue that this is sports agnostic. Once bought / franchised out, these centers can be used for other activities: how sports stadiums can be used for concerts, and tennis courts repurposed for pickleball.

But investment in leagues? teams? merchandise? From a merchandise perspective, there is no separate type of clothing or shoes needed. And leagues & teams rely on the competitive & professional angle in this sport, which in my personal opinion is not there. This isn’t a sport that has professional potential.

But let’s take a step back, and look at some Pickleball metrics:

Pickleball has only really picked up in the last few years, in the US, and has spread to other regions such as India. It’s already at fan / participation of ~50M (reportedly, this is the number of folks in the US who played Pickleball last year, it’s probably even more if we count other regions).

CAGR projected ~14% YoY & per event viewership has hit ~3M

From a CAGR perspective, it’s projected to grow at ~14% YoY for the next 10 years, versus other sports, which are fairly established and saturated. So maybe that’s one angle. Get in early in a fast growing sport and hope for the best.

From a viewership perspective: the 2023 USA Pickleball National Championships: had 2.6 million TV viewers and over 50,000 attendees. Utah Pro Pickleball Event in August 2024 had 3.3 million views across all platforms. In fact, some platforms have argued that the PGA Tour’s Phoenix Open event in Feb 2024 was only at 2.38M.

But I would argue that these sports are vastly different: one is catered to the ultra premium, and one is mass-y. Once requires significant technical skill, and has relatively few players, while one caters to the masses. And maybe golf isn’t the right sport to compare Pickleball viewership to. Wimbledon in 2024 for example, reportedly had ~37M viewers. Compare it to football, and basketball. The gap will be even more significant. So Pickleball is not quite there yet.

Pickleball is seeing investment across real estate, infrastructure, merchandise & leagues

Many investors are trying to come in and capitalize on the Pickleball opportunity. Funds, and celebrities seem to be trying to get in early into this sport.

Like I mentioned. I understand the real estate angle. But what I don’t understand is the significant investment that is happening into the sports leagues & franchises of Pickleball. Celebrities such as Lebron James & Tom Brady have invested in Major League Pickleball Franchises. There is also a National Pickleball League & a World Pickleball League coming up.

And this craze is not just limited to the US. India is also part of it. NSG is apparently investing $10M to promote pickleball in India, while Khelomore is collaborating with the All India Pickleball League to establish 100 pickleball courts within the next 2 years and investment $500K.

But what is going to sustain this? I’d compare this Pickleball to another sport that has great community participation, but is yet to scale: Frisbee. And that’s because community participation is not enough.

For a league & franchises to run, you need broadcast, merchandise, and sponsorship revenue, all which is linked to one thing: viewership

I’ve looked at the revenue breakdown of 1 league and 2 teams to understand where the bulk of their revenues are coming from. Commercial, broadcast, media rights, and sponsorship revenues can all be attributed to the eyeballs that the sport gets. The more eyeballs, the more broadcasters will shell out to show it on their platform. The more sponsors will pay to put their branding on the team merch. And the more people watch it, the more fans will buy the merchandise of their favourite team and player. 50-70% of central League and franchise revenues from from revenue buckets that are dependant on viewership. So this is paramount.

Firstly, pickleball ever getting the following of established sports, especially in India is unlikely. It may work in the US, but in India, sports are driven by heroes. We watched badminton because we saw Saina Nehwal & PV Sindhu. We watched Javelin because of Neeraj Chopra. And the 3000m steeplechase because of Avinash Sable. Pickleball is not a sport that represents the pinnacle of skill & physical effort.

Secondly, Pickleball & Padel are what I call “secondary sports.” These are sports that athletes transition to from their core sports, either after retirement, or injury. And often, the core sports that they play are what enable to them to compete in their secondary sports. For example: Tennis is a primary sport, people grow up playing, and wanting to compete here. Crossfit is another: there are many examples of ex gymnasts and weightlifters who compete in crossfit, post retirement, or in parallel to their core sport. Multiple crossfit games champions Mathew Fraser, and Tia Clair Toomey, are both weightlifters who then competed in Crossfit. And their background in Olympic weightlifting and weight training are key reasons why they are / were so dominant in Crossfit.

Further to my point of viewership, all of IPL, the central league, and the franchises run on media rights & sponsorship revenues.

In fact, in the 2023 - 2024 season of IPL, the central revenue share of the Chennai Super Kings was ~INR 479 Cr, which was ~70% of the total revenue generated, and ~130% of the total costs, which were INR 370 Cr! Which basically means that all the Chennai Super Kings had to do was show up, and get paid. Because the central revenue share covered the expenses and left ~100 Cr in profit. Anything else above this: team sponsorship, ticket sales, partnerships etc was a cherry on top.

I had written a piece on the Economics of Sports Leagues, and if you want to get into the details of this, you can check out my piece here:

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So then: if viewership is a question, why are the leagues and franchises attracting investment?

Existing sports sectors such as analysis, fitness, fantasy sports are saturated, with multiple players playing in multiple segments

One thought is: there are limited avenues for investors who want to invest in sports. The sports sectors that currently exist: health & fitness, analytics, fantasy sports, enterprise solutions, and fan engagement are all saturated, with multiple players playing, and products for each category. (You can check out the slide below).

You can check out my deep dive on the sports market here:

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[#9] Sports Tech: Where will the next wave of innovation come from?

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And existing established sports: NFL, IPL, NBA: they are very selective about investors, and there are limited seats at the table

These franchises operate at a level of valuation where only big PE players would be able to play. The teams are valued a $1B +, and while there is a minimum net worth required, the leagues and franchises also look very deeply at the brand & culture fit. And when a new team is opened, then the bidders are many. There have been cases where billionaire conglomerates have been rejected as potential owners, due to the “negative” brand image they would bring to the league

The pickleball opportunity seems to be like the UFC opportunity in the early 2000s.

While the UFC was established in 1963, nothing really was happening with it. Until 2001, when it was sold for $2M to Dana White, and Frank and Lorenzo Fertitta. Over the next 10-15 years, the popularity of the sport grew, helped in part by the Ultimate fighter series in 2005. In 2009, the UFC 100 event generated ticket revenues (GATE) of $5M, signalling that it was finally mainstream.

In 2016, UFC was sold to the Endeavour group for $4B, which was a 2000x growth, or a CAGR of 52% YoY from when it was first bought for $2M in 2001. In 2016 was when celebrities such as Tom Brady, & Venus Williams also invested. And as of 2023, the UFC was valued at $12B.

Maybe this is what investors are trying to do. Get in early and cheap into a fast growing sport, and hopefully 2000x - 6000x your investment in 10 years.

Another sports investment opportunity is to invest in Tier 3/4 clubs in established sports such as football, and reap the rewards

An example of this is Wrexham, invested in by Ryan Reynolds, and Rob McElhenney in 2021 for $2.5M, with the goal of taking it by to the Premier League. Example: While they bought it for $2.5M, teams in the Premier League, such as Manchester United are valued at $6.5B. So thats the bet.

The problem here is that teams are still loss making: Only 4 teams in the premier league made profits in the 2022-23 season. Four clubs reported a pre-tax profit in 2022/23 (Brighton & Hove Albion: £133m, Manchester City: £80m, AFC Bournemouth: £44m and Brentford: £9m), a reduction from seven clubs in the the 2021/2022 season.

But teams across Tiers in the EPL are still loss making, and need significant & ongoing investment to be profitable

And the one time cost is only the start: it requires significant ongoing expense. Take the example of Wrexham, which is also the subject of the excellent “Welcome to Wrexham”, currently streaming on Hotstar. Not only did the owners have to pay significantly higher salaries to attract players to the team, they also had unforseen expenses such as buying & restoring the stadium, setting up additional stands to handle the crowds, and so on.

But in India: We have still not been able to scale established sports such as badminton, so how will Pickleball scale?

Sports like volleyball, badminton, & table-tennis have a lot of participation. This has not translated to scaling from a league & competitive perspective. And these are mass-y sports. Pickleball to me, will remain primarily an urban sport: I don’t see this expanding too much beyond Metro & Tier 1 cities.

Participation? Check. Community building? Infrastructure? Check.

Competitive? Viewership? Mass-y? Sports Leagues? I would not bet on it.