The Business of March Madness
5 minute read · Issue Number 63 · April 9th, 2021
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The most important college basketball tournament of the year – also known as ‘NCAA’s March Madness’ – wrapped up this week.
If you’re not familiar with it, it may be because you’re not from the US. After all, Americans go wild for it.
Today we’ll talk a bit about it as a business.
March Madness (MM)
Every March, 68 college basketball teams from the first division compete for the national championship.
The annual basketball tournament is one of the most exciting events of the year, even for those who don’t care much about basketball. The excitement is contagious.
In 2020, the NCAA had to cancel MM due to the pandemic, missing out on cashing in a lot of money.
The tournament itself accounts for about 90% of NCAA’s annual revenues — MM brought about 1.05 billion USD in 2019 from media rights fees, ticket sales, corporate sponsorships, and many television ads.
According to the NCAA, about 96% of the money it collects immediately flows out to the member schools.
Schools can make good money from MM because the further a team advances in the tournament, the more the NCAA pays its conference.
It’s the only system in place that assigns a monetary value to schools based on athletic performance.
Despite being a lucrative business, there are two critical issues in their business:
Players receive zero compensation for their efforts (we’ll leave this for another day)
Let’s talk about that second one.
NCAAW – The Women’s Tournament
Interestingly, the women’s basketball tournament doesn’t turn a profit, nor does the NCAA factor its results into its annual financial distributions to schools as it does for the men.
The broadcast revenue generated by the women’s tournament is just a slice of the NCAA’s deal with ESPN, which runs through 2023-24 and is worth about $500 million over 14 years—or about $35 million annually.
Now, the idea that “nobody watches women’s basketball” is old, sexist, and dumb. People do watch women's basketball, and the audience is getting bigger and bigger.
This past March, the women's tournament brought in some severe viewership (in contrast, NBA games this season have averages of 1.06M in ratings this season):
Women’s ball is no longer just a sport for enthusiasts, and according to Deloitte, TV and sponsorship revenues for women’s sports are expected soon to eclipse $1 billion globally.
The broadcast rights are a great source of income for the NCAA. With the clear interest in diversity from sports organizations and the recent growth in women's popularity in sports, I believe we’ll see a significant shift in the value of gender equity in professional sports leagues worldwide, including college, very soon.
🎙 Halftime Snack of the Week
In our chat, we snacked about private equity, Ultimate Frisbee, owning and running a professional sports team, the role of technology in developing a professional league, diversity, and so much more.
Check out the transcript of the conversation here.
🔥 Want Your Ad to Go Viral? Activate These Emotions; What does it take to craft an advertisement that’s so engaging that viewers will choose to share it themselves, making it go viral?
🏀 Baylor’s Title Caps a Mad Month of NCAA; Check out this extensive report on the stats and facts around the tournament's business (great complimentary read to today’s article!)
💰It’s Easy (and Legal) to Bet on Sports. Do Young Adults Know the Risks?; Americans wagered $13 billion on sports in 2019. With sports betting now legal in nearly half the states, experts fear the addiction danger is not being adequately addressed.
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Until next week,
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Halftime Snacks Podcast