The Money Behind the Madness
The NCAA Wins Big Every Year
As you're no doubt aware, March Madness has more green than a St. Patrick's Day parade.
We're talking about an event that's bigger than the Super Bowl – both in terms of revenue, viewership, and ad spending.
Here's a quick breakdown of the cash flow...
TV Partnerships and Ad Revenue
In 2012, March Madness TV ad earnings eclipsed $1 billion for the first time. That same year, the NFL playoffs generated $976 million, while the NBA, MLB and NHL playoffs, combined, clocked in at just $991 million.
And last year, the NCAA Final Four matchups and final, alone, brought in $198.5 million in advertising revenue for CBS and Turner Sports.
That was a record high for the event. It's also why those broadcasters paid $10.8 billion for the rights to broadcast the tournament through 2024.
That contract alone is projected to generate $771 million per year for the NCAA.
By comparison, Fox, CBS and NBC paid just $28 million to air NFL games, the playoffs and rotating Super Bowls through 2022.
The NCAA and Schools
In addition to the $10 billion the NCAA gets from broadcast rights, it generates about $40 million from ticket sales and sponsorship deals.
All in all, the March Madness tournament generates 96% of the NCAA's total annual revenue.
A large portion of that revenue is divided among the schools and conferences that participate, with the respective shares depending on a number of factors. For instance, the number of schools a conference has playing, how many scholarships were awarded, and how far each team got.
Conferences also play a part in dispersing these large pools of money, which they can distribute evenly among schools, or based on performance and revenue generated.
According to Forbes, a team's trip to the Final Four earns its conference $9.5 million.
That can really add up: Between 2005 and 2011, the top-earning Big East conference made $86.7 million.
Add to that an unquantifiable amount of prestige and noteriety that comes with participation.
There's not just money to be made during the March Madness tournament, either.
There's money to be lost...
To begin with, there's the gambling.
Estimates of how much money is legally wagered on the tournament through state-licensed sports books in Delaware, Montana, Oregon and mostly Nevada range from $90 million to $100 million, while others say the tab could be as high as $227 million.
And that doesn't even factor in tournament bracks filled out by fully half of adult Americans.
Over 60 million Americans fill out a bracket each year, with $1 billion dollars potentially spent on off-book gambling. In fact, two years ago, the LA Times cited an FBI source as saying more than $2.5 billion was illegally wagered on the NCAA tournament each year.
Obviously, this can be a drain on worker productivity, as some surveys suggest as many as two-thirds of workers participate in at least one office betting pool.
Consultancy firm Challenger, Gray and Christmas estimates that every hour of work lost to the tourney costs employers $1.2 billion.
Of course, this assumes workers would actually be working if the tournament weren't taking place, when they really just might be wasting time doing something else...
There are workplace benefits, as well.
Studies show the tournament can actually boost morale and productivity if offices approach it in the right way.
So, no harm, no foul...
Jason Simpkins is an Editor of Wealth Daily and Investment Director of Secret Stock Files, a financial advisory focused on security companies and defense contractors. For more on Jason, check out his editor's page.
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