The Big Business of March Madness

By: Wayne Duggan

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

NCAA college basketball fans everywhere are eagerly anticipating this year’s March Madness tournament. While the tournament will certainly provide its share of sports fun and excitement, it also means big business for a number of top U.S. companies.

TV Networks

Back in 2010, the NCAA, CBS Corporation (NYSE: CBS), and Time Warner Inc’s (NYSE: TWX) Turner Sports inked a massive 14-year $10.8 billion deal for joint broadcasting rights to March Madness. This year, live games will be aired on CBS, TNT, TBS and TruTV.

Why would the networks shell out such a staggering amount of money to get rights to the tournament? In 2015, the tournament averaged 11.3 million total viewers, its highest ratings in 22 years.

With all those eyes on the big games, it’s no wonder that March Madness now generates more than $1.1 billion in advertising revenue per year.

March Madness Brands

With all that advertising money flying around, plenty of brands are betting big by being official sponsors of March Madness. However, other brands piggy-back on the tournament’s visibility as well. Even though it wasn’t an official sponsor of the tournament, a study found that McDonald’s Corporation (NYSE: MCD) gained the most exposure of any brand during last year’s tournament due to its presence on popular tournament-related online, mobile and social media sites.

McDonald’s also sponsors the All American high school basketball honors, which is an excellent way to get its brand on-air during rundowns of the top college players. According to the same study, Nike Inc (NYSE: NKE) and PepsiCo, Inc. (NYSE: PEP)’s Gatorade also gained significant brand exposure last year even without being an official sponsor of the tournament.

Going ‘All In’

While many people don’t consider a $5 or $20 work bracket pool to be “sports gambling” in the typical sense, an estimated $9 billion was wagered in one form or another on last year’s tournament.

As much as $7 billion of those bets were made illegally, but Las Vegas casinos still pocketed around $100 million in profits from legal tournament bets last year. Vegas casino operators Las Vegas Sands Corp. (NYSE: LVS), Wynn Resorts, Limited (NASDAQ: WYNN), MGM Resorts International (NYSE: MGM) and Caesars Entertainment Corp (NASDAQ: CZR) are hoping that this year will be another big year for legal tournament betting.

Takeaway

The companies mentioned above are just a handful of the hundreds of names that are involved in the big business of March Madness. The college athletes are competing for the glory of a championship, but the tournament scoreboard for these companies will be counting in dollars and cents.

Disclosure: the author is long WYNN.

Lime Brokerage LLC is not affiliated with these service providers. Data, information, and material (“content”) is provided for informational and educational purposes only. This content neither is, nor should be construed as an offer, solicitation, or recommendation to buy or sell any securities. Any investment decisions made by the user through the use of such content is solely based on the users independent analysis taking into consideration your financial circumstances, investment objectives, and risk tolerance. Lime Brokerage LLC does not endorse, offer or recommend any of the services provided by any of the above service providers and any service used to execute any trading strategies are solely based on the independent analysis of the user.

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