Each year, March Madness opens a fire hose of cash, as gamblers, advertisers and television networks try to get in on the action.
Americans wagered an estimated $8.5 billion in 2019 on the NCAA’s Division I Men’s Basketball Championship, as March Madness is formally known. Television networks paid $1.1 billion to broadcast the games. And businesses spent an estimated $898 million to advertise during the series, according to Kantar Group.
But fewer than 10% of Division I athletic departments—the highest level of intercollegiate athletics sanctioned by the National Collegiate Athletic Association—generated enough revenue to cover the expenses of their sports programs.
Traditionally, football and basketball are the biggest earners. Even so, in 2019, just 68 of 351 Division I men’s basketball programs generated more revenue than expenses. And in 2016, the most recent year the NCAA published figures for football, 73 of 252 Division I teams earned more than they spent.
“There are lots of misconceptions,” said Daniel Fulks, a certified public accountant who prepared the NCAA’s annual revenue and expense report for a decade. “One is the NCAA is hoarding money in a vault in Indianapolis. The other is athletic programs make money. They don’t.”
In 2019, athletic departments across all three NCAA divisions generated $10.6 billion in revenue from all sports and spent more $18.9 billion. The two biggest costs were financial aid for athletes ($3.6 billion) and coaches’ compensation ($3.7 billion).
To close the gap, generated revenue is supplemented by institutional and governmental support and student-activity fees. In 2019, that allocated revenue totaled $8.3 billion.
But net generated revenue is used to measure whether a program pays for itself, and only 25 of the 351 Division I athletic departments that provided data to the NCAA for 2019 generated more revenue than they spent.
“The average deficit is around $16 million in the athletic departments,” said Andrew Zimbalist, a sports economist at Smith College.
All 25 moneymakers were part of the Football Bowl Subdivision, one of three Division I subcategories. FBS schools, such as the University of Alabama, participate in bowl games at the end of the season and, as a group, spend the most and make the most.
In 2019, FBS schools’ athletic expenses ranged from nearly $81 million to more than $220 million. And net generated revenue ranged from a loss of $65.3 million to a surplus of $43.7 million.
Generated revenue didn’t exceed expenses for any athletic department in the other two subcategories. Losses at schools in the Football Championship Subdivision—including schools such as Villanova, with midlevel football programs—ranged from $2.2 million to $42.1 million. And at schools without football, losses ranged from $3.6 million to $42.5 million.
The NCAA’s biggest source of income is March Madness, which produces 75% or more of the organization’s annual revenue, Mr. Fulks said. (The NCAA doesn’t control football broadcast rights.)
Approximately two-thirds is channeled to the participating basketball conferences based on a unit system.
“If a team participates, every time they win, they get a unit,” said Dr. Zimbalist. “You can earn up to five units.”
This year, each unit is scheduled to be worth $337,141, according to the NCAA. Normally, that amount would be distributed each year for six years for a total value of around $2 million. But because the 2020 tournament was canceled for Covid-19, the total value distributed over that span of time will be about $1.67 million.
Conferences set their own rules for sharing the pot with members.
“Most take the money from your school and any others that made units in the March tournament and add it up,” Dr. Zimbalist said. “After they pay schools that participated for their expenses, the net amount left over is distributed equally among conference members. Even though the school, by winning a game, generated $1.67 million over six years, they don’t get all that. They have to share it.”
According to the NCAA, the median figures for men’s basketball teams in 2019 were $6.6 million in generated revenue and $7.3 million in expenses for FBS programs; $530,445 in generated revenue and $1.7 million in expenses at FCS schools; and $581,373 in generated revenue and $2.5 million in expenses at schools without football.
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Famously, the men competing in March Madness aren’t paid (although they receive athletic scholarships). But their teams still make out better than Division I women basketball players, whose teams receive no financial reward for competing in March Madness.
That could change if the College Athletes Bill of Rights, introduced in Congress in December, is approved.
The bill would give athletes in revenue-generating sports a share of the profits, including a splash of March Madness money.
Write to Jo Craven McGinty at Jo.McGinty@wsj.com
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The Link LonkMarch 12, 2021 at 05:30PM
https://www.wsj.com/articles/march-madness-is-a-moneymaker-most-schools-still-operate-in-red-11615545002
March Madness Is a Moneymaker. Most Schools Still Operate in Red. - The Wall Street Journal
https://news.google.com/search?q=Red&hl=en-US&gl=US&ceid=US:en
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