Everyday economics and March Madness is about big business.

Following the March Madness Money

by Elaine Schwartz    •    Mar 24, 2015    •    165 Views

“Several years ago, it was decided to ‘seed’ the best players through the championship draw in handicap tournaments so that the players in each class shall be separated as far as possible one from another.”

American Lawn Tennis, 13 January 1898

And so began the first recognized use of “seed.” When you seed a tournament, you make sure the playoffs will flower by scattering the best teams in the early rounds and weeding out the weakest. As a result similar “seeds” do not compete against each other until the end. The March Madness seeds were scattered so that #1 Wisconsin could start against #16 Coastal Carolina and #1 Duke played #16 Robert Morris.

The seeding pattern enables a team to earn a unit for every game it plays except for the championship match. A team that makes it to the championship match usually gets five units. And that takes us directly to March Madness money.

Where are we going? To the business side of March Madness.

Following the Money

The Teams

$255,379 will be paid per unit by the NCAA to a team’s conference in 2015. If a conference has many winning teams, it receives more units than a less successful conference. The value of those units are then shared among all of the teams in the conference.

The Coaches

  • $1 million plus paid to 35 college basketball coaches in 2014.
  • At $9.7 million, Duke’s head coach Mike Krzyzewski is at the top.
  • 30 percent of Division I athletic spending went to coaches and staff.

The NCAA

  • $900 million in revenue from broadcast rights, “corporate partners,” tickets.
Incentives from March Madness NCAA revenue

From: NCAA

 

You and me:

  • $9 billion (estimates vary considerably) in bracket bets.
  • $1.9 billion of unpaid or unproductive work time because 77.7 millions workers will have watched or been distracted by March Madness.
  • 94 million chicken wings purchased during 2014 March Madness.
  • 15 million hours related to March Madness on digital devices.

CBS and Turner Broadcasting

  • $10.8 billion paid to NCAA for 14-year broadcast rights deal.
  • $1.5 million received per 30 second ad in 2014 (Super Bowl 2015 equivalent was $4.5 billion.)
  • $1 billion plus in ad revenue totals.

Colleges:

Basketball revenue varies considerably.

The top:

Incentives differ among NCAA March Madness school for dollar support.

The bottom:

Incentives different for March Madness bottom five.

 Our Bottom Line: Big Business

Looking at the massive spending and revenue that relate to the NCAA, the teams, schools and coaches, the media and many of us, we can characterize March Madness as big business.

Sources and more...While articles on the business side of March Madness abound, the most interesting were from Bloomberg, US News, ibtimes, the Washington Post and Vox. And livescience provided a good history of "seeds."

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