The Real Winner of March Madness.
March Madness is the biggest financial event for the NCAA.
While the NCAA is a nonprofit organization, how much money does it make off March Madness?
What exactly does it do with the money?
Here’s a financial breakdown of the NCAA’s most popular event.
About 90% of the NCAA’s revenue comes from March Madness through television and marketing rights, as well as championship ticket sales.
One of the most profitable contracts within March Madness is a 14-year, $10.8 billion broadcasting rights deal with CBS Sports and Turner Broadcasting signed in 2010.
The NCAA extended this deal in April 2016 for an additional $8.8 billion that will keep the tournament on CBS and Turner until 2032.
Of the 90 NCAA championships that are run every year, only five generate as much money as they cost to run: men’s basketball, men’s ice hockey, men’s lacrosse, wrestling, and baseball.
The revenue generated from tournaments is redistributed back to NCAA member schools and student-athletes.
- 60% of NCAA revenue is distributed to Division 1 Schools.
- 4.37% of NCAA revenue is distributed to Division 2 Schools.
- 3.18% of NCAA revenue is distributed to Division 3 Schools.
As you’d probably guess, most of the Division 2 and 3’s budget is devoted to supporting and running their championships.
Division 1 Revenue Distribution
As seen above, a staggering 27% of revenue distributed back to D1 Schools is through the Basketball Performance Fund, which is based on a school’s March Madness performance.
For every game a team plays, its conference will receive a ‘unit’. If a team makes it to the championship game, it can earn up to five ‘units’.
In 2021, a single ‘unit’ was worth $337,141…
For smaller schools that go on ‘Cinderella runs’, this payout can be a considerable portion of their overall revenue.
This year, St Peter’s, a small Jesuit university in Jersey City with ~3000 students, has been an unstoppable underdog, beating Kentucky, Murray State, and Purdue so far.
Fun fact: St Peter’s has a smaller endowment ($37 million) than the total value of Kentucky coach John Calipari’s current contract ($86 million).
With a basketball operating budget of less than $250k and 3 ‘units’ earned so far, it’s a monumental financial win for St Peter’s regardless of what happens next in the tournament.
However, the NCAA encourages conferences to divide the payout equally among member schools. Larger conferences such as the Big Ten, which have many sources of income, can divide up the money and send it to member schools.
On the other hand, smaller conferences, such as St Peter’s conference (MACC), are counting on the payout to cover their own expenses. Thus, only the leftover money gets sent to member schools.
According to ABC, “For a league like the MAAC, which lacks the revenue of major football conferences, a run like this is transformative. The MAAC hasn’t received more than one unit in the NCAA tournament since 2009.”
Ultimately, it remains unknown how much money St Peter’s will actually receive for their historical run.
While there’s plenty of debate surrounding the nonexistent pay to college athletes (though there are alternatives for athletes), it’s worth noting that the NCAA only uses what’s left over after distribution to fund its own operating expenses.
I hope you found this article to be entertaining and informative. Thanks for reading!
