March Tournament Teams Have More Money On The Line Than You May Think

By: Wayne Duggan

Think you can pick the Final Four teams? Test your skills, and win free trades if you’re right.

March Madness is the best time of year for college basketball fans. The level of play may not be on par with the NBA, but there’s a purity to the competitive amateur spirit of college sports. College players are competing for the glory of victory, not the number of zeroes on their next paycheck.

However, the schools the players represent have a lot more than reputation riding on the big tournament. Here’s a look at the financial stakes for the top-performing teams.

The Numbers

The NCAA rewards conferences, not teams, for their performance in the NCAA tournament. The NCAA pays conferences a single basketball “unit” for each tournament game played. While each unit was worth only about $260,525 last year, the NCAA pays out unit payments to conferences on a six-year rolling basis. That means that conferences will continue getting paid for this year’s tournament games for five additional years.

Conferences must divide the tournament earnings among all of their schools, but Forbes calculated that a trip to last year’s Final Four was worth $8.2 million over the six-year payment period.

In addition, the value of one of the NCAA’s basketball units typically rises between 1.0 and 4.0% annually, meaning that wins become more valuable each year.

NCAA Cash Cow

How does the NCAA afford such large conference payments? For starters, the organization brings in an incredible $700 million-plus from the tournament itself.

About $220 million of that money will be dished out to the conferences based on their schools’ performances in the tournament. A portion of the remainder will be used to help pay for the championships of other NCAA sports that don’t generate as much revenue.

Last year, the ACC took home the largest tournament purse at $35 million, while smaller conferences like the Big Sky, the Big South and the Big West earned just $1.7 million each.

Should College Sports Be A Free Market?

Critics of the NCAA say that the athletes are the ones with the talent people are paying to see, and it’s only fair that they receive their fair share of the revenue. While many college athletes receive tuition and living expenses scholarships, the top players could be earning much more of the pie.

Time estimates that at least 20 NCAA basketball players were worth more than $1 million each for their respective schools last year. In addition, by Time’s calculations, most college players would be worth more than just the values of their scholarships in an open market.

Takeaway

It’s nice to think that college basketball is far removed from the million-dollar contract negotiations and free-agency departures that have become a major part of the professional sports landscape in the past 50 years.

However, the reality is that the NCAA, the schools and even the top players (who are looking to be 1st round NBA draft picks) have a lot of money on the line in the tournament, and the teams involved are playing for far more than pride.

Disclosure: the author has no position in the stocks mentioned.

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