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The BIG Business of March Madness – Where does all the $$$ go?

March 14, 2017

The 79th march madness tourney starts with play-in games Tuesday, March 14th in Dayton, OH. But if you are curious where the money from the Big Dance goes you are in the right place.

 

 

BIG LOSERS

 

Let’s start out with the biggest losers of the NCAA national tournament.

 

Companies

 

U.S. companies are likely the biggest loser of all.

 

If you are filling out your bracket on company time, don’t worry you're not alone. Some 23.7 million employees will research, create, and check their NCAA basketball tournament brackets at work.

 

Estimated losses to U.S. employers are a staggering $2.1 billion to $4 billion!

 

That’s a lot of cash.

 

Some argue businesses should embraces March Madness. Stating, a business that is open to March Madness is more likely to be a place where people enjoy work. There is also the argument that a creative manager could use the energy centered around March Madness to rally the troops and carry that energy forward.

 

Berkshire Hathaway

 

One such creative CEO is taking advantage of this energy in a unique way.

 

Instead of pizza, legendary investor Warren Buffet announced any employee that correctly picks the Sweet 16, will win $1

 

million a year for life.

 

The odds on getting 16 right are poor—1 in 826,000. But, they are better than Buffet’s Billion Dollar Challenge in 2014 for a perfect bracket—1 in 9,200,000,000,000,000,000. And Buffett will award $100,000 to the person who goes the furthest even if they can’t get all 16 correct.

 

It is still an overall loss for businesses. But, since employees are going to fill out brackets regardless, I’m with Buffet.

 

Fans Going to the Game

 

There were 703,000 fans who attended games in 2016.

 

The average single-game ticket this year costs about $477. and each fan will spend an additional $2,100 in hard earned money on food, lodging, and transit.

 

BUT

 

This is still a bargain compared to the Super Bowl, where the cheapest ticket sells for around $2,700.

 

We also drink on average 3.5 million more barrels of American beer during March.

 

I am going to call this one a win.

 

 

Losing schools

 

Most schools lose money on their basketball programs.

 

Roughly 2/3 of schools lost money in the 2013-2014 school year!

 

It is expensive to field a team and even more expensive to send a team to the Big Dance. But, if your team wins it can pay off big. Louisville recorded a $24.2 million profit last year.

 

Players

 

No player will make any reported income for this year’s tournament. The average NBA rookie makes 17 times more money in a given season than a full NCAA scholarship is worth.

 

BIG WINNERS

 

So where is all the money going?

 

NCAA

 

Perhaps the biggest winner of all. The NCAA sold the rights to CBS and Time Warner sports and until 2032 for almost $20 billion!

 

March Madness is how the NCAA makes money. About 90% of it in fact.

 

This year’s TV rights alone are worth $702 million.

 

The president of the NCAA Mark Emmert’s is going to make $1.9 million this year. The best part for Mark, it is guaranteed through 2020.

 

Conferences

 

Each conference that has a team in the tourney will get a piece of the $220 million payout.

 

For every game that a conference has a team play, the conference will get a payout of roughly $1.7 million. And another $1.7 million for each win after that.

 

For small conferences this money can represent more than 70% of their annual income!

 

Huge win for small conferences and reliable yearly income for the big conferences.

 

Winning schools

 

Louisville recorded a $24.2 million profit last year. Some other notable schools, Arizona, Ohio State, University of North Carolina, Duke, Wisconsin, and Indiana made at least $10 million each.

 

Not to mention the merchandise and increased exposure.

 

CBS/ Time Warner

 

Despite a huge drop in viewership last year (a decrease of 37%) and the whooping $19.6 billion price tag for the TV rights (2011-2032), revenues for the entertainment giants continue to climb.

 

In 2015, each 30 second ad sold for an average of $1.5 million and an estimated $1.19 billion in ad revenue was generated. This year will likely be no different. CBS and Time Warner both stand to rake in huge profits.

 

Social Media

 

In 2015 over 350 million people were talking about March Madness on their various social media outlets. There were over 56 million Twitter and Facebook impressions in 2016.

 

More users = more ads.

 

Twitter is using SnappyTV, a startup acquired in 2014 to capture even more of the special moments with 15 sec highlight clips.

 

Hosting Cities

 

Fourteen US cities will host the rounds of 64 and 32. The four play-in games will be in Dayton, OH.

 

The “First Four,” games whittle the pack from 68 to 64 and have been played in Dayton for several years. The city has seen a boost of $66 million to its local economy since 2001.

 

But, this is peanuts compared to the city that hosts the “Final Four.”

 

Phoenix

 

As the lucky host the last four games of the tournament, the city of Phoenix stands to make an estimated $100 million to $150 million. Roughly 125,000 fans from around the country will pour into this southwestern city for the Final Four.

 

 

Las Vegas

 

The ever-present odds maker, Las Vegas will see a big boost in March too. Accruing over $100 million in profits during the month. Which makes sense, Americans bet $2 billion, or $29 per bracket. Roughly $9 billion is wagered every year.

 

Nearly 40 million Americans will fill out a total of 70 million brackets this year according to the American Gaming Association.

 

Good luck!

 

The actual tournament starts on Thursday, March 16th at around 12:20 EST.

The Championship game will be held on Monday, April 3rd.

 

If you enjoyed this article, please share on your social media.

 

This article was written by Curtis Roberts, an attorney at The Founder's Attorney.

If you have any questions or suggestions he can be reached at curtis@foundersattorney.com.
You can check out his LinkedIn page here.

 

 

 

 

 

This article is for general information and entertainment purposes only. The views of the author are their own and do not represent the views of The Founder's Attorney. The information presented should not be construed to be formal legal or financial advice nor the formation of a lawyer/client relationship or any fiduciary duty.

 

 

Resources

  1. https://wallethub.com/blog/march-madness-statistics/11016/

  2. http://www.ncaa.org/about/resources/finances/revenue

  3. https://www.forbes.com/sites/chrissmith/2012/03/14/march-madness-a-trip-to-the-final-four-is-worth-9-5-million/#c0b439f215a2

  4. https://www.forbes.com/sites/kurtbadenhausen/2017/02/28/warren-buffets-2017-march-madness-bracket-contest-1-million-a-year-for-life/#2d35cbc2fad7

  5. https://www.bloomberg.com/news/videos/b/5ed709b8-9d33-4678-b19b-9f7dd7ad843e

  6. http://www.foxbusiness.com/features/2017/03/01/march-madness-2017-u-s-companies-will-lose-billions-to-slacking-workers.html

  7. https://www.challengergray.com/press/press-releases/its-march-madness-years-madness-could-cost-19b

  8. http://www.foxbusiness.com/features/2015/03/17/business-march-madness.html

  9. https://www.bloomberg.com/news/videos/b/5ed709b8-9d33-4678-b19b-9f7dd7ad843e

  10. https://www.forbes.com/sites/simonogus/2016/03/17/the-economic-impact-of-the-ncaa-basketball-tournament-from-first-four-to-final-four/#66047e591b56

  11. http://www.investopedia.com/articles/investing/031516/how-much-does-ncaa-make-march-madness.asp#ixzz4bFeuUapm 

  12. http://www.usatoday.com/story/money/columnist/strauss/2017/03/09/go-embrace-march-madness-employers-theres-nothing-crazy/98904394/

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