Money of March Madness

[SluSignGuy]

Here is an article from the WSJ. I excerpted part of it about the A-10, with the full article below. I thought an NCAA Unit was worth a lot more than $208,000.

http://online.wsj.com/article/SB123664681664078731.html

In 2007-08, each unit was worth $206,020. A school that goes to the finals earns five credits that year, worth just over $1 million, which is then divided among the universities in the conference.

The schools in the Atlantic 10 conference, for instance, earned 27 units last year (these units represent six years of accumulated tournament wins for conference schools) and the NCAA sent the conference a check for $5.56 million. This check was then divided up among the 14 schools in the conference, or $397,143 each. Of the 32 Division I conferences, 23 earned less Madness money than the Atlantic 10, with most of these conferences earning below $1.5 million. The biggest prize in 2007-08 went to the Big East Conference. Its 16 schools divided just over $19 million, or $1.2 million per school -- possibly enough to pay the head coach's salary.

By ANDREW ZIMBALIST

The annual three-week orgy of basketball, involving the nation's top 65 college teams, is once again upon us. March Madness they call it, and madness it is.

All told, there are six rounds and 64 games of nationally televised and streamed amateur hoops played around the country. To be associated with these athletic rites of spring, companies pay CBS roughly $100,000 for a 30-second spot of advertising in round one and more than $1 million per spot in the finals. CBS itself is paying the NCAA $6.1 billion over 11 years for the right to sell these ad spots and to broadcast the tournament.

Millions of basketball fans, their friends and associates place bracket bets on each game. Experts estimate that more than $7 billion is wagered on the March tournament, surpassing the $6 billion gambled on the Super Bowl. The Final Four is so popular that it is routinely played at indoor football stadiums and each game is likely to boast attendance above 40,000.

So, a captivated national audience, a massive television deal and dozens of corporations drooling to get a piece of the action must all add up to a financial bonanza, right? Not quite.

There are a few winners. The National Collegiate Athletic Association, for instance, makes out quite well. Last year, Madness brought in $548 million from TV rights and an additional $40 million from ticket sales and sponsorships, together representing an eye-popping 96% of all NCAA revenue.

Amid this cornucopia, the schools themselves are usually the losers. According to the NCAA's latest Revenues and Expenses report, in 2005-06 the median Division I men's basketball team generated revenue of $480,000 and had operating costs of $1.33 million, yielding a net operating loss of $850,000. If capital expenses and full university overhead were included, these results would be even more dismal.

The most successful programs, of course, will do better (the top 10 basketball teams had revenues of more than $11 million), but even these programs frequently lose money when the accounting is done properly. Why?

Most of the 300-plus Division I schools aspire to make it to the March tournament. To do so, they have to spend big. Since they can't go to a free-agent market to hire the best high-school players, they attempt to attract them in other ways. First, they spend lavishly to court the players during the recruitment process.

Next, they attempt to provide state-of-the-art arenas and training facilities, complete with luxury suites, Jumbotron scoreboards and spacious locker rooms. They invest in academic tutoring facilities, costing as much as $15 million, to help the athletes stay eligible for competition. Then they hire well-known coaches with a reputation for sending an occasional player to the NBA.

And the coaches don't fare too shabbily either. In 2005-06, the head coaches of the 65 Division I teams in Madness had an average maximum compensation of $959,486, with the top paid coach earning a guaranteed salary of $2.1 million and a maximum salary of $3.4 million. These figures exclude extensive perquisites, including free use of cars, housing subsidies, country-club memberships, access to private jets, exceptionally generous severance packages, handsome opportunities for outside income, and more.

These guys are making almost as much as NBA coaches, even though their teams' revenues generally are below one-tenth those in the senior circuit. The trick, of course, is that the players aren't allowed to be paid, so the coaches, in essence, get the value produced by their recruits. It doesn't hurt that college sports benefit from state subsidies and federal tax exemptions, and that they have no stockholders looking for quarterly profits.

Equally startling, the average compensation of these 65 coaches is double or more that of the typical university president -- a clear statement of the perverse priorities of these fine institutions of higher education. Little wonder that American industry hasn't been standing up too well in world competition.

If everything goes according to plan and the team makes it to Madness, here's the payoff. For each game that a team plays up to the finals, the team earns one credit unit from the NCAA. Every year there are 126 credit units awarded.

In 2007-08, each unit was worth $206,020. A school that goes to the finals earns five credits that year, worth just over $1 million, which is then divided among the universities in the conference.

The schools in the Atlantic 10 conference, for instance, earned 27 units last year (these units represent six years of accumulated tournament wins for conference schools) and the NCAA sent the conference a check for $5.56 million. This check was then divided up among the 14 schools in the conference, or $397,143 each. Of the 32 Division I conferences, 23 earned less Madness money than the Atlantic 10, with most of these conferences earning below $1.5 million. The biggest prize in 2007-08 went to the Big East Conference. Its 16 schools divided just over $19 million, or $1.2 million per school -- possibly enough to pay the head coach's salary.

A few successful schools will also experience a modest fillip in their sponsorship revenue. Some will find that their student applications go up and an even smaller number may see an increase in booster donations. Not surprisingly, those high-schoolers who apply to a college because it has a good basketball team do not tend to score high in the SATs or in class rank. As a result, basketball success may temporarily drive up applications, but it does not raise the quality of the student body. And higher booster donations often come at the expense of contributions to the school's general fund.

Moreover, on-court success one year is frequently followed by competitive disappointment in a subsequent year, leading to lower applications and donations. Many schools are so intent in chasing the holy grail of athletic prominence -- coaches and athletic directors face rich, one-sided incentives encouraging them to win at all costs -- that they think little of breaking NCAA rules. When a school gets caught and scandal ensues, its reputation suffers.

And the maddest part of it all is that the "student-athletes" are doing all this entertaining during their semester. But not to worry: Article I of the NCAA Bylaws stipulates that intercollegiate sports are to be subordinate to the academic mission of the college.

Mr. Zimbalist is a professor of economics at Smith College. His latest book (with Nancy Hogshead-Makar) is "Equal Play: Title IX and Social Change."

[Cowboy]

-from what i have heard each conf has its own way to split the ncaa tourney money and i think most confs allow the team(s) that earned the units to get a bigger share

-paul hewitt a great example of catch lightening in a bottle and fill your bank account