NCAA Tournament Brings in Big Money
Who’s going to win this year’s NCAA men’s basketball tournament? Your guess is as good as ours. Probably better, actually.But here’s one March Madness guarantee you can count on: the wildly popular tournament is going to generate tons of cash for the NCAA. And that’s why an expanded tournament is likely, possibly as soon as next year
The 65-team tournament will bring in roughly $650 million for the NCAA this year — with the vast majority of that coming from broadcast rights payments from CBS.
That money basically funds the entire operation of the National Collegiate Athletic Association, and is the financial lifeblood of many smaller schools’ athletic departments.
The big schools get most of that money. And more often than not, the more profitable programs make it to the Final Four over so-called Cinderellas. But profits aren’t a guarantee of success. There are plenty of big money schools not in this year’s tournament.
Big dollar schools staying home. North Carolina, last year’s champion, finished second to only Louisville in terms of revenue and profits for its basketball program last year according to figures filed with the Department of Education. It didn’t make the tournament this year though.
Neither did three other schools in the top 10 in basketball revenue — Illinois, Indiana and Arkansas. Still, those teams are certain to get more cash from this year’s tournament than smaller schools that made it to The Big Dance.
About $167 million of the proceeds from the tournament is split among all the NCAA conferences based on the number of games each conference’s teams played in over the last six years. That money is then typically divided evenly between members of the conference.
So North Carolina and their hated rival Duke will both see the same payday from the tournament, even if No. 1 seed Duke is the one cutting down the nets on April 5.
And because the payments are based on a six-year period, even if a Cinderella team from a smaller conference does well this year, that won’t significantly increase the payout for smaller schools.
More teams mean more dollars. That’s why it’s very likely, if not certain, that this is the last year only 65 teams will be invited to the tournament.
There’s too much potential for a lot more money if the tournament is expanded — and too many smaller schools need more of the big money.
The most discussed expansion scenario is to have a field of 96 teams. The teams ranked 1-32, which are primarily the big-dollar schools from the six major conferences, would wait while teams ranked 33 through 96 would play each other for the right to challenge the Goliaths.
The extra games would be shown on cable and on the Internet, which are the two fastest growing sources of new rights money for sports broadcasts.
The NCAA is expected to opt out of the last three years of an 11-year, $6 billion deal with CBS after this year’s tournament and seek a new long-term broadcast and Internet rights deal.
With more games to air in the week before the round of 64 begins, there is the likelihood of a much bigger payday, said Neal Pilson, a sports television consultant.
“I personally am not that excited about extending the tournament to 96 teams,” he said. “But it likely will result in more money for the colleges. The NCAA has a fiduciary responsibility to at least find out what a new deal would be worth.”
Pilson thinks Walt Disney (DIS, Fortune 500), with its combination of ABC and ESPN might be the front runner in the bidding for the NCAA. But he thinks CBS (CBS, Fortune 500) will fight hard to retain it, even if it means teaming with a cable network operator to make the bid. There are reports CBS is looking at a joint bid with Turner Sports, which like CNNMoney is a unit of Time Warner (TWX, Fortune 500).
Big win for the little guys. Who will benefit most from the additional dollars a new deal could bring? Surprisingly enough, the smaller schools.
In the current 65-team tournament, about half of the teams are from the six major conferences. But if you look at the RPI rankings of schools this year, a ranking that is widely considered to be what the tournament selection committee relies heavily upon, nearly two-thirds of the teams that could be added to a bigger tournament might come from the smaller conferences.
And since those schools would not have to play a top-ranked team in the first round, they would stand a much better chance to win at least one game. That would only help their programs and increase their future payouts.
Those small schools are far more dependent on the NCAA money than the major conference schools, which typically have their own TV deals and huge arenas.
Yes, far more of the tournament money flows to the Big East (about $27.5 million) than to the lowly Big West (about $4 million). But the Big East schools average revenue of $8.5 million and a profit of nearly $3 million annually.
By contrast, the Big West schools average just over $1 million in revenue and typically lose $80,000 each on basketball. Who do you think needs the extra money more?
So if you’re struggling to fill out a 96-team bracket this time next year, you can blame the unusual combination of big money schools and the Cinderella teams