Follow the March Madness Money

March Madness is so popular among American sports fans that even President Barack Obama was featured on ESPN filling out his brackets. The President, who predicted a Men’s Final Four of Duke, Kansas, Ohio State and Pittsburgh, said “One thing I wanted to make sure is that viewers who are filling out their brackets — this is a great tradition, we have fun every year doing it.”

According to Investopedia, like so many things in American popular culture, March Madness is an exercise in follow the money. “While many consider the annual NCAA Division I Men’s Basketball tournament to be one of the greatest tournaments in sports, there’s more to the madness than just the teams battling for their place in the Final Four.  Like all great sporting events, the tournament has its share of economic impacts on a variety of levels.”

For example, the CBS television network controlled the March Madness airwaves for years; in 2011 a landmark deal was made to allow Time Warner’s Turner to split the rights for the next 14 years at a cost of approximately $10.8 billion.  “Along with the steep price tag comes the revenues from broadcasting the tournament both on television and via other media outlets,” Investopedia said.  “Last year, CBS is estimated to have raked in about $620 million from TV advertising alone, while revenues from ‘non-traditional’ sources were up 20 percent.  Even with more people watching their favorite television shows in non-traditional ways, sporting events have still managed to keep live viewership growing, and there’s nothing quite like the nail-biting thrills of a last-second jumper.”

Then, there are the schools.  According to Forbes, “The NCAA distributes money from their media contracts to Division I conferences based on their performance in the Division I Men’s Basketball Championship over a six-year rolling period.  Independent institutions receive what’s called a ‘full unit share’ for every game they play in the tournament over the same rolling six-year period.  The basketball fund payments are sent to conferences in mid-April each year, and then conferences allocate the money as they see fit.  Some conferences equally split the revenue among all conference schools, while some provide a disproportionate share to the teams that were actually responsible for the ‘unit creation.’  One ‘unit’ is awarded to a conference for each game a member school participates in, except the championship game.  In 2009-10, each ‘basketball unit’ was approximately $222,206 for a total $167.1 million distribution.  The 2010-11 season was supposed to be the last year of the old TV contract, where CBS was slated to spend $710 million for media rights.  Based on this figure, the NCAA estimated that each ‘basketball unit’ would be roughly $239,664 for a total $180.5 million distribution.”

Sports tourism is another way that March Madness stimulates the economy.  Because the games are played in various locations across the country, teams and their fans spend money on hotels and restaurant meals, a positive economic impact on the host cities.  The biggest winner of 2011 is expected to be Houston, where estimates have direct spending by March Madness fans hitting $100 million.  Denver, Cleveland and New Orleans are also expected to reap significant economic benefits.

March Madness also offers Americans an opportunity to gamble.  According to Sportsbook.com, approximately $75 million was bet in Las Vegas on the tournament.  Office pools totaled more than $3 billion, with the cost of lost productivity estimated to be approximately $1.8 billion.