March Madness: The NCAA’s gold mine

Every March, sports fans go wild at March Madness, one of the most significant sporting events held in the United States, with a worldwide impact. March Madness often surpasses the Super Bowl when it comes to sports betting.

So much so that the money generated by this tournament is genuinely exorbitant, making it a highly anticipated sports phenomenon and a significant business for the National Collegiate Athletic Association (NCAA). Yes, March Madness is a billion-dollar business for the association since every year, it raises around one billion dollars thanks to ticket sales, broadcasting rights, sponsors, commercials, etc.

However, this kind of competition not only means business for the NCAA, but the sports industry also benefits from this “sports madness” since millions of gamblers generate around 3 billion dollars by betting and using the best sportsbooks bonuses for march madness every year. However, our primary focus is the NCAA’s earnings from this tournament. Let´s take a look.

How much money does the NCAA make from March Madness?

March Madness is arguably the NCAA’s golden goose. Not surprisingly, men’s basketball is the association’s primary revenue. In 2021 the NCAA broke a revenue record, earning $1.16 billion, and March Madness generated 90% of that revenue.

The most lucrative contracts negotiated with this event are those for broadcast rights. The NCAA has billion-dollar contracts (around $10 billion) with Turner Broadcasting and CBS Sports, which had a 14-year term (since 2010) but, as of 2016 were extended through 2032 for an additional $8 billion.

Where does the money go?

One of the most significant controversies about NCAA earnings is that none of the March Madness players get paid. Yes, unbelievable but true; those who put their bodies into generating billions of dollars around the tournament must do it for free.

That is what the NCAA is responsible for, financing the athletes’ scholarships during college. However, it could be argued that what is distributed is closer to 60%.

The distribution of money is complex, as there are many areas to cover. Still, the main pillars are payments made to the conferences that play in March Madness, tournament expenses, and scholarships.

How is the money divided among the conferences that participated in March Madness?

There are currently 68 teams competing in the tournament, and each team’s conference receives a portion of the proceeds from the Basketball Performance Fund, which is usually around $170 million.

The conference receives a payment for each game the team plays, but the amount of that payment depends on the team’s performance over six years. To measure this performance, each conference is assigned “units” for participating in the tournament. Each game is worth one unit (with a few exceptions), regardless of whether the team wins or loses. This means the maximum a team can collect is six units if it makes it to the final from the first-four bracket. A few years ago, each unit was worth $280,000 per year, which means $1.6 million if the six-year payout period is taken into account. However, although the current record needs to be more accurate, that number is growing yearly.

For some conferences, the smaller ones, the NCAA payments are the most significant income they have throughout the year. However, for other larger meetings, NCAA payments are a small portion of their annual revenue.

Amateur is the main rule

As mentioned earlier, there are a lot of controversies regarding the fact that the NCAA does not directly pay the players who participate in the tournament. The NCAA argues that such athletes are primarily students and should first focus on their studies and then on being athletes. They refer to the players as “student-athletes.”

The association asserts that students should be amateur athletes participating in an intercollegiate sport and that health and education should be the basis for this participation. The compensation students receive is scholarships and coverage of school expenses such as books, tutors, etc.

Conclusion

March Madness is an event that generates tons of passion and also millions of dollars. The tournament has become a significant business for the NCAA (since it represents the largest of its revenues) and the rest of the sports industry.