The opening weekend of March Madness is over and we've seen it all already: familiar faces, traditional powerhouses steamrolling their early competition, Davids beating Goliaths, last second buzzer beaters and Gus Johnson losing his mind (what else is new?). 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. Here are just a few of the places the dollars come and go during these three amazing weeks every March. (Keep the kids out of your hair and wallet by saving on summer camps, sports leagues, day trips and more. Check out Budget-Friendly Summer Fun.)

TUTORIAL: Personal Income Tax Guide

In a dramatic shift from the years of CBS controlling the airwaves during the tournament and deciding which games the viewers were able to watch, this year the TV rights will be split. In a landmark deal between long-time rights holder CBS and Time Warner's Turner, the two television competitors will split the rights for the next 14 years. The total cost for the television rights is in the neighborhood of $10.8 billion.

Along with the steep price-tag come the revenues from broadcasting the tournament, both on television and via other media outlets. 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%. Even with more and 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.

The Schools
As highlighted in a recent article in Forbes, the NCAA pays out the revenues it receives from its television rights deals (the aforementioned $10.8 billion) to the schools dependent upon their performances in the NCAA Tournament over a 6 year rolling span, with each team receiving so much for every game played in the tournament. So basically, the more games you win, the more money you receive. Forbes estimates that each victory is worth roughly $256,000. While this sounds like a great system of meritocracy, it's actually heavily skewed in favor of the large schools that play in the "big-name" conferences.

The Big East for example, which houses traditional powerhouse programs like Connecticut, Georgetown and Syracuse has been awarded nearly $90 million in March Madness winnings. Compare this to the earnings of the Mountain West, which is home to BYU, San Diego State and UNLV, being awarded less than $20 million total. While the compensation system is by no means unfair, as money is directly tied to performance, it can result in a system in which the rich get richer and the smaller schools have a tougher time closing the gap when recruiting top level talent. (Level up your winnings by investing in this fast-paced, highly skilled industry. See Power Up Your Portfolio With Video Game Stocks.)

Sports Tourism
From the first game in Dayton, Ohio to the National Championship in Houston, the cities involved in hosting their respective regional games throughout the tournament expect to see a positive economic impact from the tournament. With each team bringing in thousands of out of town fans to its games, cities like Denver, Cleveland and New Orleans expect to see economic impact numbers in the millions. The biggest winner should be Houston however, where estimates have direct spending from March Madness fans topping the $100 million mark.
By creating a weekend festival feel, the host cities do much more than just cash-in on the games themselves, as local bars, restaurants and malls are expecting massive crowds during their host weekends. Hotels especially will be counting the money signs, as historical occupancy levels have increased 40% during the tournament. Also, some hoteliers have been successful in mandating minimum three-night stays while increasing rates as well.

TUTORIAL: Popular Forex Currencies

Vegas Wins, Your Boss Loses
Sportsbook experts estimate that roughly $75 million will be wagered in Vegas on March Madness - money lines, spreads, props and basically any bet you would ever want to make. Although Ohio State entered the tournament as the number one overall seed, that hasn't stopped Dukies and Jay Hawk backers from throwing their hard-earned money behind these two perennial contenders. And if you thought the money floating around in Vegas was big, then you're probably not in an office bracket. Estimates place the total dollar amount of American office pools in excess of $3 billion, with the total cost in productivity in the neighborhood of $1.8 billion. (The glitz and glam of Hollywood could help put some more glitz in your pocket. Check out Analyzing Show Biz Stocks.)

That's right - you and your co-workers (who made a big fuss about having to pay for the coffee that used to be free) have no problem throwing $10, $20, even $50 on one of the most unpredictable events on the planet. Not to mention that the wife's boss will probably end up winning again this year, even though she doesn't know what state Morehead State is located. But I'm sure you didn't either before this past weekend.

The Bottom Line
With so much money in play, it's easy to forget that March Madness is one of the greatest amateur sporting events in the world. These kids have spent thousands of hours in the gym hoping to play in front of millions for a chance to go to the Final Four. While some of them will go on to fame and fortune in the NBA, over 90% of them will not. So let's remember that for the players laying it all on the line these unforgettable three weeks, it really is for the love of the game.

Related Articles
  1. Term

    Public Goods & Free Riders

    A public good is an item whose consumption is determined by society, not individual consumers.
  2. Economics

    Calculating Cross Elasticity of Demand

    Cross elasticity of demand measures the quantity demanded of one good in response to a change in price of another.
  3. Economics

    Explaining Fair Market Value

    Fair market value is the price at which a buyer and seller are willing to exchange a good.
  4. Economics

    Understanding Production Efficiency

    Production efficiency is the point at which an economy cannot increase output of a good or service without lowering the production of another product.
  5. Economics

    What Does Short Run Mean?

    Short run is the concept that for a business, at least one factor of production is fixed while others are variable.
  6. Investing

    Did the Fed Miss its Window to Raise Rates?

    The debate in the media over whether the Federal Reserve will announce liftoff this month or in December continues to rage on.
  7. Economics

    What's a Price Ceiling?

    A price ceiling is the maximum amount a seller can charge for a product or service.
  8. Economics

    Explaining Industry

    The term industry refers to a classification of companies that share similar business activities.
  9. Personal Finance

    Who Is Next in the Athleisure Trend?

    Which companies are jumping on the growing athleisure wear trend and how can investors start getting in on this?
  10. Economics

    The 4 Industries Driving New Mexico's Economy

    Discover the four primary industries that are considered to be the most important drivers in the well-being of the economy of New Mexico.
  1. What is the utility function and how is it calculated?

    In economics, utility function is an important concept that measures preferences over a set of goods and services. Utility ... Read Full Answer >>
  2. What does marginal utility tell us about consumer choice?

    In microeconomics, utility represents a way to relate the amount of goods consumed to the amount of happiness or satisfaction ... Read Full Answer >>
  3. What is the difference between JIT (just in time) and CMI (customer managed inventory)?

    Just-in-time (JIT) inventory management focuses solely on the need to replenish inventory only when it is required, reducing ... Read Full Answer >>
  4. What are some examples of Apple and Google's best-selling product lines?

    There are many good examples of product lines in the technology sector from some of the largest companies in the world, such ... Read Full Answer >>
  5. What is a negative write-off?

    A negative write-off is a write-off conducted by a company or accountant after deciding not to pay back an individual or ... Read Full Answer >>
  6. How can tariffs cause inefficiencies in domestic industries?

    Any government regulation naturally creates inefficiencies in a pure supply and demand marketplace. When it comes to the ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Real Estate Investment Trust - REIT

    A REIT is a type of security that invests in real estate through property or mortgages and often trades on major exchanges ...
  2. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  3. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  4. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  5. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  6. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!