To start, the broadcast rights contract is one of the most valuable contracts associated with the event. The NCAA inked a 14-year, $10.8 billion contract with CBS Sports and Turner Broadcasting in 2010, which was paid over the course of the pact. The contract was renewed in April 2016 for an extra $8.8 billion, ensuring that the event will be broadcast on television until 2032. This is just one of the many stats March Madness brings to us.
Approximately 96 percent of the money collected by the NCAA is immediately distributed to the member institutions, according to the NCAA. It’s the only system that provides a monetary value to sporting accomplishments.
The Pandemic’s Aftermath
The NCAA’s decision to postpone 2020’s tournament shortly before it began—the first cancellation in the tournament’s 81-year history—slashed earnings for the 2020 fiscal year by more than half, to just under $520 million. But, if not for some cost-cutting and a $270 million insurance policy taken up in anticipation of such an unforeseen occurrence, it could have been much worse. Despite an annual reduction in ticket sales, TV rights fees, and other tournament-related earnings of more than $860 million, the NCAA completed the fiscal year with a net loss of little under $56 million.
The gaming business was also struck hard. According to the American Gaming Association, sports betting plunged 40% from the previous year when every casino in the nation was shutdown in March. With the growth in the number of states that have legalized sports betting in recent years, to 25 states plus Washington, D.C., gambling income might see a significant surge.
The Distribution of Tournament Funds
This year, 68 teams are going to be invited to participate in the competition. Each of those teams’ conferences will get a share of the basketball fund, which is a pool of money. In 2019, the fund totaled about $170 million, accounting for around 20% of the NCAA’s TV commercial revenue.
A team’s conference receives a compensation for each game they play, which is based on their success over a six-year rolling period. Conferences are awarded “units” for participating in the tournament, with each unit equaling around $280,000 for the 2019 tournament. A team can earn up to five units if it makes it all the way to the final game. If a team from the first-four bracket advances to the final game, it will receive a total of six units.
Naturally, each conference wants as many of its member schools to participate in the tournament as possible in order to increase the amount of money it receives. The basketball fund money received by smaller, lesser-known conferences can account for more than 70% of their yearly revenue.
The payment might represent a much-needed monetary injection for a surprise team that is completely unknown and makes it through numerous rounds. The basketball fund, on the other hand, is more of a financial frosting on the cake than a big source of money for larger conferences like the Atlantic Coast Conference or the Big Ten.
Individual Schools and Conferences
The NCAA advises conferences to split the funds evenly among its members. Larger conferences, which have many sources of revenue, regularly divide the money and give it to the athletics programs of their member institutions. Smaller conferences, on the other hand, rely on that money to meet their costs. Only the remaining funds are distributed to member schools.
In actuality, the majority of schools do not profit from their basketball programs. In 2019, just 25 NCAA Division I schools, or 7% of those with programs, made a profit. Over the last three years, the basketball program at the University of Kentucky has been the most profitable, bringing in an average of $31.2 million per year. With $29.2 million, the University of Louisville is in second place.
How is the NCAA’s Financial Strategy Received?
The NCAA’s financial strategy has received a lot of criticism. Colleges see relatively little, while the players, who generate the revenue, see nothing at all. Even so, in the instance of the NCAA, the organization does not keep the majority of the money it receives. Only the remainder—roughly 4%, according to the NCAA’s financial disclosures—is used to cover its own running costs.