The Money Behind the March Madness NCAA Basketball Tournament
College basketball fans love the second half of March, when 68 teams meet in the men's NCAA Tournament to determine the best team in the sport. Last season, it was Kansas, but who will walk away with the March Madness trophy this year? That remains to be seen.
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One thing is certain, however. The 14-city event dominates the news and pushes all other sports onto the back burner -- and it's a very big business. Between media, marketing, broadcasting, ticket sales, gambling and the rest, billions of dollars change hands.
The Business of Broadcasting
In 2010, CBS Sports and Turner Broadcasting signed a $10.8 billion deal with the NCAA to broadcast the men's basketball tournament for 14 years, ending in 2024. In 2016, the same parties agreed to an eight-year extension that will last through 2032 and is valued at $8.8 billion.
Turner Broadcasting now is an arm of Warner Bros. Discovery.
March Madness Is the NCAA's Bread and Butter
At the time of the announcement of the extension of the television contract, then-NCAA president Mark Emmert made it clear just how important the men's March Madness tournament is to the organization and its member schools. He told USA Today that of the money generated from NCAA championship events that the men's tournament brings in "90% of the total revenue that flows into the association and back out to the schools."
That number hasn't wavered much in the ensuing years. Sportico reported that in 2021, the NCAA made a record $1.16 billion, with more than 85% of it resulting from March Madness.
TV Rights Are Worth the Cost
CBS has held March Madness tournament broadcasting rights since it first spent $48 million to acquire them for three years in 1982. And there's a reason why CBS has renewed year after year: ad revenue.
A week before this year's tournament began, CBS Sports' head of sales John Bogusz told reporters that all the ad spots for the early-round games had sold out with just a smattering remaining for the rest.
Sportico reported that 30-second ads cost a "few hundred thousand dollars in the early rounds," with the same length of spot sold between the $2.2 million and $2.3 million for the upcoming final.
In all, CBS and Warner Bros. Discovery should bring in more than $1 billion in revenue, per Sportico.
But Is It a Ratings Winner?
In 2022, the games in the Final Four - the semifinals and the national final - delivered huge ratings.
The semifinal game between bitter rivals Duke and North Carolina averaged 18.5 million viewers - second highest ever for a college basketball game in cable TV history, according to the NCAA. The game was the final one for Duke head coach Mike Krzyzewski, who retired after 47 years as a college head coach.
Two days later, the final between North Carolina and Kansas drew an average of 18.1 million viewers, making it the third most-watched cable college basketball game. The game, which Kansas won 72-69, was the most-viewed men's championship game ever on cable TV.
The entire tournament averaged 10.7 million total viewers over each of the 67 telecasts, which was an increase of 13% over the previous year, according to the NCAA.
More Viewers = More Money
While the networks don't disclose much about their revenues, Bogusz acknowledged in the pre-tournament conference call before the 2022 event that advertisers were happy to spend because of the ratings bonanza."We still deliver significant ratings, and people watch these programs live," he said, according to a Deadline report. "So, between a larger audience and delivering them in real time, I think advertisers across all demo groups are allocating more dollars to the sports marketplace."
March Madness Isn't Just Big for US TV Audiences
The last-minute shots, nail-biter finishes and bracket intrigue that fuel the March Madness craze are by no means limited to the United States -- and advertisers know it. In 2019, Medium reported that about 100 million people in 180 countries would watch the tournament from televisions around the world. Now, four years later, that's easier than ever to do if you have a VPN to tap into U.S. broadcasts from any corner of the world.
There's no question the college basketball game has grown internationally. During the 2021 tournament, The Washington Post reported that of the 1,051 players on the 68 teams competing, 157 came from 49 countries and four unincorporated territories. Ten years ago, only 78 players came from outside the United States.
Big Companies = Big Bucks
Since ads are so pricey, the financial commitment required to get a few seconds of ad time during the March Madness tournament leaves little room for anyone but the biggest corporate fish.
According to Sportico, the tournament has 17 "premium" advertisers. Three of them are called the "Corporate Champions," and that's why you see so many ads from them: Capital One, Coca-Cola and AT&T. The latter, which also sponsors the "AT&T at the Half" halftime show, spent $66.1 million in 2022, Sportico reported.
In all, about 60% of the in-game spots will go toward the premium advertisers, Sportico said. That's why you will see so much of Charles Barkley in the Capital One spots.
Winning Is Profitable for Schools
The NCAA distributes much of its March Madness profits to Division I sports conferences. This year, the organization expects to dish out more than $170.3 million to the conferences from its Basketball Performance Fund." The better the conference's teams finish in the NCAA Tournament, the higher the allocation. The money is shipped to the conference, which then will allocate money to its members.
Pandemic Proved Costly
The NCAA doesn't announce how much money it brings in on ticket sales from the men's tournament, but we got a good glimpse of what happened when it wasn't played. The spreading coronavirus was declared a pandemic in March 2020, just a week before the scheduled start of the tournament, forcing its cancellation.
The decision to call off the tournament resulted in a $702 million loss in revenue from television and marketing rights, The New York Times reported.
Host Cities Can Make Hundreds of Millions
March Madness means big bucks for the tournament's 14 host cities, whose restaurants, hotels, entertainment venues, gas stations, car rental companies, ride-share drivers and the entire tourism economy benefit from both indirect and direct spending related to the games.
Albany, New York, is the smallest of the eight cities to host first-round games this year, and city leaders were expecting an economic impact of $3.5 million of direct spending this year, the (Albany) Times Union reported.
And in Houston, which is hosting its fourth final four, could bring in many times more than that. The Houston Business Journal said that the last time the city hosted the March Madness final round - 2016 - the economic impact reached $250 million.
It's Not March Madness Without Brackets
Filling out tournament brackets and putting up a few bucks in office pools is an annual ritual across the country. It's a form of entry-level gambling that draws in countless people who aren't otherwise gamblers or even basketball fans. The American Gaming Association projected that this year, 56.3 million people would fill out brackets.
But There's More to Betting Than Brackets
With the expansion of legalized sports betting in the United States, gambling on March Madness isn't limited to brackets. In fact, that gaming association said brackets are just a small part of the $15.5 billion expected to be wagered on the tournament. The organization predicted 31 million American adults would place a bet at a retail sportsbook, online or with a bookie.
Big Upsets Equal Big Winnings
Mismatches are another way gamblers win big. When betting on longshots, there's a lot to be gained. In 2018, the University of Maryland, Baltimore County (UMBC) had a Cinderella run in the tournament that started with them becoming the first 16-seed in the country to beat a No. 1 seed. Before that 16s were 0-135 against No. 1 seeds. When they upset heavily favored Virginia that year in the first round, one $800 bet came in for $16,800. A $100 bet paid out $2,500.
But No. 16 seed Fairleigh Dickinson's upset of No. 1 Purdue in this year's tournament - just the second time a 16 beat a 1 - paid off big for some bettors. The Action Network reported that it was the biggest upset of all time, with the point spread considered, and one better who put down $33,000 on the underdog walked away with $495,000.
It's Estimated Companies Suffer Billions in Lost Productivity
A report released this month by outplacement firm Challenger, Gray & Christmas, Inc., said employees' diverted attention from working on their brackets and keeping up with the games in progress will account for an estimated $17.3 billion in lost productivity this tournament season.
But Lost Wages Could Purchase Office Morale
Although the lost wages speculation is bad on its face, many businesses use March Madness to work in their favor. The same study showed that employers encourage camaraderie among employees, such as picking one game that all in-office and remote workers can watch together. Or, employees can submit their brackets, with the owners of the top brackets receiving a gesture for winning, such as a gift card for a free lunch.
There's Plenty of Money in It for the Coaches
While players can financially benefit from Name, Image and Likeness Agreements, coaches are the really high earners. In 43 of America's 50 states, college coaches -- either football and basketball -- are the highest-paid public employees in the state, according to data compiled by the Online Betting Guide.
Bill Self (Kansas) and John Calipari (Kentucky), both participants in this year's tournaments, are the highest-paid public employees in their states.
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Jami Farkas contributed to the reporting of this article.
This article originally appeared on GOBankingRates.com: The Money Behind the March Madness NCAA Basketball Tournament
