Nobody won a billion dollars this year. But ad revenue numbers are coming in, and just hearing them doesn’t tell you where the money’s going. Who actually profits on America’s favorite college basketball tournament?
The Top of the Bracket
According to Kantar Media, the 2013 March Madness tournament generated $1.15 Billion in ad revenue1. That’s more than any other postseason sports broadcast including the NFL playoffs2. In 2013, one 30 second spot cost a whopping $1.42 million1. Based on last year’s numbers alone, CBS and Turner Sports stand to make somewhere between $300 million to $500 million in advertising profit in 2014.
In 2011, CBS and Turner Sports struck a deal with the NCAA worth $10.8 Billion to gain exclusive broadcasting rights to the tournament through 2024. The ongoing deal gives the NCAA a $771 million payout annually4.The first round of money changing hands.
Round Two: The NCAA’s Budget
The NCAA’s annual funding comes from the CBS/Turner payout and several major sponsorships from corporations like AT&T, Capital One, and Coca-Cola.3 In addition to the $771 million, the NCAA profits from licensing, marketing fees, and ticket sales from the men’s basketball tournament5.
The NCAA’s annual revenue is somewhere around $845 million. $497.6 million6 of that is allotted to a Distribution Fund through which the NCAA helps colleges support their sports programs. The Basketball Fund (that covers the March Madness tournament plus yearly costs of basketball programs) is about $194 million (more than 1/3 of the distribution plan for the year)6. The NCAA is also responsible for travel costs7, operating costs, and salaries for its employees as well as scholarships, student assistance, sports sponsorships, and academic enhancement6 with the remaining $347.4 million of their annual revenue.
In mid-April, the NCAA distributes money to the conferences based on their tournament qualification and success from 2008-2013.6 Each conference will receive one unit for each team for each game in which it plays, excluding the championship game. One unit this year is approximately $250,100.6
More than one-third ($427.3 million) of the $1.15 billion in ad revenue in 2013 came from just 10 sponsors, or corporate partners1.The second round of payouts go to the NCAA’s budget.
Round Three: Conferences and Schools
The NCAA distributes money through its basketball fund to the college athletics conferences depending on how many teams from each conference make the tournament over a six year rolling period and how well those teams perform. This is done to avoid putting too much pressure on each game.6 The conferences are then encouraged to distribute the money equally among all schools in that conference.6
Most schools use their NCAA money to fund their athletics programs for the next year. However, despite the millions of dollars generated in revenue each year, most schools lose money on athletics.8 Some men’s basketball teams and a few football teams can actually garner a profit for their schools, but even in these cases, most of the money goes to funding sports that don’t have broad television appeal, which are often women’s sports.8The last round is distributed among conferences and schools.
Recap: Who Actually Profits?Only the companies getting ad revenue make a profit.
The ongoing debate about paying college athletes often paints the NCAA as an evil empire exploiting its workers, but the reality is that although a few college sports and events can make millions of dollars, the total operation costs for all sports is millions more. If a non-profit like the NCAA were required to pay college athletes, the money flow would have to shift dramatically – as we’ve seen – in order to support that many more salaries in the system. Whether college athletes should be able to make money off of their own likenesses or receive external bonuses of any kind, is a different debate.
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Images: Kurt Michelson