March Madness, it’s one of the biggest events in American sports 68 college teams get invited to the big dance by early April. There’s only one left standing. So how big is March Madness? It draws in millions of viewers and breaks in more than 800 million dollars each year from its television deal alone. Which makes up more than 75% of the NCAA’s yearly revenue. Bracketology is also a thing. The tournament creates a frenzy around brackets which fans fill out to predict the outcome of every single game. In 2014, Warren Buffett and Quicken Loans even offered a prize of $1 billion to anyone predicting a perfect bracket. The odds of doing that were 1 in 9.2 quintillion. March Madness is about upsets, underdogs and up lifting narratives. But it’s also about the money. Here’s how the Big Dance became a big business. The NCAA’s Division one Men’s Basketball Tournament is the official name of March Madness. It got its start back in 1939 and back then there are only eight teams that participated. As the years went on, the tournament invited more and more teams. The “March Madness” nickname didn’t start until 1982 when CBS announcer Brent Musburger coined the phrase. At the time, there are only 48 teams competing in the tournament. The modern format featuring 64 teams began a few years later in 1985 and by 2011 there are 68 teams competing in the tournament. March Madness has since become a staple sports with its historical championship games featuring players like Michael Jordan, Patrick Ewing and Michigan’s “Fab Five.” But March Madness has turned into an economic powerhouse for the NCAA. Revenue from the tournament helps fund less popular or less TV friendly college sports across the U.S. Most of the NCAA’s revenue comes directly from March Madness. Specifically from the NCAA’s lucrative deal with CBS and Turner Broadcasting. The TV deal brought an eight hundred fifty seven million dollars in 2018. Back in April 2010, the NCAA, CBS and Turner reached a deal for exclusive television, internet and other broadcasting rights for 14 years ending in 2024. The deal included more than $10 billion over the course of the 14-year contract. The deal was revisited back in 2016 and extended the original agreement. Instead of the deal ending in 2024, it was extended another eight years through 2032. Under this new agreement, CBS and Turner would pay an additional $425 million between 2018 and 2024. The remaining $8.3 eight billion would be paid out between 2025 and 2032. These media right are massive deal for CBS and Turner. In 2018, March Madness has brought in more than 97 million viewers and was watching more than 180 countries. March Madness also hit $1.32 billion in TV ad spending in 2018. Compare that to other sports his postseason, March Madness beat out the NBA, MLB and college football. Only the NFL generate more ad spending. You’ll notice for March Madness there are a ton of big corporate sponsors and there’s a main reason why. They’re getting that hard-to-reach demographic young college-educated Males who are actually watching TV. So many advertisers, they struggle to reach those people. They’re hard to find. They’re hard to actually get on TV. But this tournament actually collects them and puts it in front of those screens. Then, there’s the money that comes from March Madness and it’s adjacent tournament, the NIT. The NIT tournament is essentially a consolation tournament for teams that did again from March Madness. Together March Madness and NIT helped contribute to more than $132 million in ticket sales for the NCAA in 2018. And that’s including revenue from championships and other sports. Even though college football’s national championship grabs higher TV ratings than its counterpart in basketball, the NCAA doesn’t receive any revenue from bowl games or the college football playoff. In college football, athletic conference’s negotiate individual TV deals. Out of the 90 championships at the NCAA hosts each year, only five generate at least as much money as it costs to run them. The NCAA brought in revenue more than $1 billion in 2018. But more than $972 million came directly from the March Madness TV deal and the NCAA’s ticket sales. Where does all this money go? The NCAA redistributes the money it makes from March Madness to over a thousand schools across 24 sports in three divisions. Nearly half a million student athletes currently compete in college sports. While their funding comes from individual schools, the NCAA divvy up the revenue for March Madness for Student athletes and the programs that help them. In 2018, over a $164 million went to the NCAA’s D1 Basketball Performance Fund. That cash is distributed to conferences and independent schools based on their performance during March Madness over a six year period. The NCAA isn’t the only one making money. The coaches get paid too. If a team gets a March Madness playoff berth, then the school’s head coach receives a bonus. John Calipari is the head coach of the Men’s Basketball team for the University of Kentucky He’s set to earn $8 million during the most recent season. His base salary from the University of Kentucky is $400,000. But the media and endorsement compensation clocks in at $5 million dollars. The remaining $2.6 million dollars is Calipari retainer. John Calipari doesn’t just rank as one of the highest-paid coaches in college sports, He also technically ranks as one the highest paid public employees in the country. His salary is more than Kentucky’s governor Matt Bevin who makes over $145,000 a year. Calipari even makes more than a U.S. President who makes about $400,000 a year The relationship between why players don’t get paid?
But why coaches do? They see all this money coming into the NCAA because of March Madness, because of college basketball, and they say look it’s because of the players. They need to get a cut of that revenue. They are the product. Why are they not getting paid? But the schools will say look they are getting paid. They’re getting a free full ride scholarship that’s worth hundreds of thousands of dollars. And some people will say look you’re getting a lot more exposure when you’re playing college basketball. Zion Williamson is much more famous because he plays for Duke. If he was playing in the G League right now, if he was a rookie somewhere, internationally, or maybe it on an NBA team, not in a big market, maybe we don’t hear as much about him. So he may be making himself more money because he’s getting that national exposure. But there’s even more money behind March Madness. Back in 2018, the American Gaming Association estimated that Americans would wager about $10 billion on March Madness and only 3 percent would be legal. Some of these illegal bets were the direct result of die hard and casual sports fans participating in March Madness polls with their friends and around the office. These polls are a collection of people trying to predict the outcome of every single game between 68 teams in their March Madness Brackets. At the time, Nevada was the only state where Americans could legally wager on sporting events. But in May of 2018, the U.S. Supreme Court voided the Professional and Amateur Sports Protection Act, which has been in place since 1992. The law banned sports betting in states that didn’t have a law on sports betting already. While not every state has lifted its own provisions on sports betting as of yet, states like New Jersey open its doors to betting on both professional and amateur sports. So I’ve said that I’m gonna place two $20 bets. I’m gonna walk back and make those two bets, the first two legal sports bets in the history of this state. It will not be on the Boston Red Sox. You’ve got the handle number. That’s how much money is being spent. But most of that money goes to the winners. The actual money that goes to the casinos isn’t very small. Maybe 5% of what’s actually getting taxed. And then the amount that’s being taxed on that, the amount that the governments make is an even smaller percentage of that. So when you’re hearing billions of dollars that are being bet, just a couple million dollars are actually going into these state tax coffers. So it’s much smaller than you think. March Madness alone is close to $1 billion business for the NCAA and it doesn’t appear to be slowing down anytime soon. Viewership for March man was its highest-ever in 2018. And the league’s lucrative TV deal will be in place until 2032. That’s 13 more years of big money for the big dance.