Cashing In On the NCAA Tournament

(Chicago, IL) – Everybody knows the NCAA Tournament is big business, but most don’t realize the financial significance upon mid-major conferences like the Missouri Valley and Ohio Valley Conferences.

According to Investopedia, one-third of college basketball programs lose money. The margin for error at Drake is significantly different than it is at Duke. The advantages in the ‘money conferences’ are many and none are more pronounced then during March Madness.

For all of the negatives people throw at the NCAA, we must applaud the fact that 96% of the money they take in from this annual celebration of college basketball, they give right back to the schools involved! They have created a ‘unit’ system, where every conference receives a pay-out for every game in which one of their teams participate.

This year’s payout to teams will be roughly $220,000,000 based on the money NCAA receives from CBS on an annual basis. Each team, in each game receives, for its league, a share of that money. This year’s pay-out is roughly $1,640,000 per unit, or game in which they play.

That money is distributed to each team in the league evenly, or so the NCAA suggests to the conferences. The leagues themselves may dip into that fund for expenses incurred. The money is also distributed over a six year period of time.

So let’s break it down. In the Ohio Valley Conference, Austin Peay played in one game. The NCAA gives the OVC $1,640,000 spread out over six years, to the 12 teams. In round numbers, let’s call the annual pay-out to be $270,000. The 12 teams receive $22,500 per year for the next six years.

The Missouri Valley accrued five ‘units’ this year. Wichita State played in three games and Northern Iowa two. Roughly the Valley ‘earned’ $8.3 million. There are only ten teams in the MVC so their annual share will be approximately $138,000 per year over those six years. That amount of money probably doesn’t push Drake into the Duke atmosphere, but it helps. Both UNI and Wichita State narrowly lost their second round games, the numbers would have really popped had they both advanced.

What about the other end of the spectrum? The Atlantic Coast Conference might as well order some private jets. Six ACC teams are in the Sweet Sixteen, so the league will receive a minimum 19 ‘units’. In other words, the 15 ACC schools will share no less than $31 million spread out over those six years. So poor little Duke will collect over $340,000 each of the next six years.

With each participation ‘unit’ those numbers go up. Six ACC schools play this weekend. Realize with each win, they get to play again and earn more cash. If three of those six teams advance, it’s another $4.9 million in the hands of teams that already have a competitive advantage. It’s scary.

When ‘money conference’ schools primarily play home games and neutral site games prior to the conference season, they create a competitive advantage. When the NCAA Selection Committee rewards that behavior they create a competitive advantage, and when the teams receive more money because of those advantages, their budgets are bigger and they create another competitive advantage.

Here’s to North Carolina winning it all. At least they traveled to Northern Iowa and played. Oh yeah and they lost.

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