March Madness is big business for the National Collegiate Athletic Association (NCAA), where its biggest basketball games tip off and sports fanatics scramble to fill out tournament brackets and place bets in office pools. The NCAA typically pulls in about a billion dollars each year in revenue from media rights fees, ticket sales, corporate sponsorships, and a proliferation of television ads anchored around the three-week-long tournament.
And the games aren’t just a big business within the collegiate ecosystem. In 2022, 45 million Americans will wager an estimated $3.1 billion on the tournament, according to the American Gaming Association. Big brands also will take their piece of the profits, but the NCAA conference commissioners and executives will see the heftiest cash-out.
- Despite a large amount of money generated by the NCAA and its member colleges during March Madness, the players receive zero compensation.
- The money generated during the annual tournament is divided among the various conferences and is dependent upon the performance of schools in their division, not directed by the NCAA.
- Broadcast rights continue to be a good source of income for the NCAA; CBS Sports and Turner Broadcasting found their returns profitable enough to extend their contract until 2032.
The Size of the Pot
Basically, March Madness is the NCAA’s bread and butter. In 2021, college athletics’ governing body earned $1.15 billion in revenue, with the tournament representing almost 90%. On the surface, that seems like cause for outrage, especially in light of how much the players earn: nothing.
One of the most lucrative contracts connected with the tournament is the one for broadcast rights. In 2010, the NCAA signed a 14-year, $10.8 billion contract with CBS Sports and Turner Broadcasting, paid over the term. The deal was extended in March 2016 for an additional $8.8 billion that will keep the tournament on the networks until 2032.
According to the NCAA, about 90% of the money that it collects immediately flows out to the member schools. It’s the only system in place that assigns a monetary value based on athletic performance.
A 2021 rule change allows NCAA athletes to earn money from their names, images, and likenesses, though they're still prohibited from earning a salary to play while in school.
How Tournament Money Gets Divided
This year, 68 teams got an invitation to play in the tournament. Each of those team’s conferences will get a piece of a pot of money known as the basketball performance fund. The fund is nearly $170 million in 2022.
For each game that a team plays, its conference gets a payout, which is based on its performance over a six-year rolling period. Conferences get units for their tournament participation. If a team makes it all the way to the championship game, it can earn as many as five units. If a team makes the championship game from the first-four bracket, it could earn a total of six units. In 2021, a unit was worth $337,141.
Of course, each conference wants to see as many of its member schools in the tournament as possible, to raise the payout that it receives. For smaller, lesser-known conferences, the basketball fund money that they receive can represent a major portion of their annual income.
For a surprise team that is virtually unknown and makes it through multiple rounds, the payout can represent a much-needed cash injection for its conference. For larger conferences, however, such as the Atlantic Coast Conference (ACC) or the Big Ten, the basketball fund is more like financial icing on the cake than a major source of revenue.
The NCAA’s decision to pull the plug on 2020’s tournament just before it got underway due to the pandemic—the first cancellation in its 81-year history—slashed revenue by more than half for the 2020 fiscal year, to just below $520 million. It ended up posting a net loss of just under $56 million for the fiscal year.
Conferences vs. Schools
The NCAA urges conferences to divide the money equally among their member schools. Larger conferences, which have multiple sources of income, routinely divide up most of the money and send it to their member schools’ athletics programs. Smaller conferences, however, count on that money to cover their own expenses. Only the money that’s left over goes to member schools.
Despite the proliferation of bets associated with the March Madness tournament each year, the NCAA’s official policy on sports gambling is this: “If you put something at risk, such as an entry fee, for an opportunity to win something in return, you violate the NCAA sports wagering bylaws.”
How Much Are the NCAA’s Annual Revenues?
In fiscal year 2021, the NCAA generated $1.15 billion in revenues. March Madness accounts for a majority of its revenues, which come from broadcast rights, ticket sales, corporate sponsorships, and television advertising.
When Was the First NCAA Basketball Tournament?
The first NCAA men’s basketball tournament took place in 1939 with eight teams participating. Today, 68 teams participate each year in what is now known as March Madness.
How Many Teams Play During March Madness?
A total of 68 teams play in the March Madness tournament. The tournament lasts three weeks.
The Bottom Line
There’s plenty of criticism of the funding model used by the NCAA. The colleges see very little, while the players, who actually create the income, see none at all. Still, in the case of the NCAA, the organization isn’t pocketing most of the cash that it takes in. Only what’s left over, according to the NCAA’s financial disclosures, goes to its own operating expenses.