In recent years, the popular multi-billion-dollar NCAA tournament known as March Madness has engaged up to 1,268 universities and conferences from across North America. In this article we shall see How Much Money Do Schools Make In The NCAA Tournament?
As a result, it has attracted commendable attention as a big-time marketed competition based on attendance, broadcast ratings, and prize money for teams. The NCAA tournament is held every year and makes a substantial revenue.
So, how much do schools earn from participating in the competition? Is there a chance it’s worth a million dollars or more? It inextricably links to two major factors.
Two major factors
These factors influence the NCAA’s annual revenue with the amount schools can earn in the tournament. They are:
- NCAA’s Annual Revenue
- Athletes’ Participation And Allotments
NCAA’s Annual Revenue
Average Revenue
The amount of money a school can make depends on the percentage of revenue distributed to its athletes. The NCAA allocates $600 million to member institutions and conferences in Division I, accounting for nearly 60% of its annual revenue.
The NCAA made $1 billion in income in the 2016-2017 fiscal year. Dividends to Division I members totaled $560.3 million that year, accounting for the largest NCAA outlay.
Due to the covid-19 pandemic in the year 2020, the NCAA men’s basketball tournament was canceled, resulting in a record loss of $800 million. Nonetheless, it generated a record of US$1.16 billion in revenue for the fiscal year that ended on August 31, 2021, up from US$519 million in 2020.
Sources Of Revenue
The increase in revenue majorly came from;
- The Division I Men’s Basketball Championship
In 2016-17, the Division I Men’s Basketball Tournament brought in almost 82% of the fiscal year’s revenue.
In the 2021 fiscal year, more than 85% of the annual revenue($1.6m) came from the Big Dance.
- Tv And Marketing Rights Fees.
During the 2021 March Madness, over 68,000 fans attended the tournament at the Lucas Oil Stadium in Indianapolis, giving the NCAA a sum of US$916 million.
- Championships And NIT Tournaments
- Investment income
- Sale Services
- Loss Of Revenue Insurance (Due to the 2020 pandemic break)
Distribution of Revenue
The NCAA distributes the revenue it generates through “distribution units.” A substantial chunk is allocated to its members through a complex network of various grants and funds, the largest of which is based on the school’s March Madness performance.
As a result, the amount of money a school receives in a year’s tournament is determined first by its revenue and proportion of distribution.
Athletes’ Participation And Allotments
NCAA’s Rules
The NCAA has limited the benefits that collegiate athletes may receive from their school’s conference. It excludes them from sharing in any of the profits generated by their participation.
Thus, rent-seeking grew increasingly profitable for the athlete’s schools, resulting in significant economic rents for them at the expense of the athletes. As a result, economists labeled them a cartel.
Athletes Eligibility
The NCAA requires students to complete three conditions to compete in college athletics during their first year:
- complete the appropriate academic courses,
- have a qualifying grade-point average (GPA), and
- acquire SAT or ACT score
The NCAA’s Three Divisions
In addition to the Division I Men’s Basketball Championship, the NCAA membership approved two further divisions in 1983.
Division I championships, in contrast to the others, receive the greatest fund, more than $150 million, while divisions II and III receive only 37 percent and 3.18 percent of total NCAA revenue, respectively. They will have to split to fund their membership, demonstrating why small colleges participate in the competition.
However, Division I and II schools are permitted to give scholarships to their athletes, but Division III schools can only provide financial aid to their athletes. For colleges to make the most of this opportunity, they need to take their ground in the Big Dance.
Tournament Rounds
The NCAA distributes revenue based on the number of tournament games played each year, each earning a “unit” or percentage for the conference. Each unit awarded to a team guarantees the NCAA will pay the conference for the next six years.
In the 2019 and 2020 tournaments, one unit values were $280,300, and $282,100 respectively. That is, a tournament game appearance is worth $1.6 million over six years.
Participation
Aside from the national championship, a school’s performance in a tournament game has no bearing on its allocation. For competing in the NCAA Tournament, each school earns one distribution unit for their conference.
For the year 2022 tournament, each unit is worth $338,887. So, for conferences with 11 schools, it is worth $2,033,322 over six years. Hence, each game played earns a conference one unit, which is allocated evenly among the schools in the conference
The MW sent four teams to the tournament, each earning $1,355,548 per year for the next six years, for $8,133,288. That’s how much money the Big Dance event could bring in for a school!
So, a school’s chance of making up to $1.6 million is determined by whether or not they participate in any tournament games.
Allotment Estimation
During the 2019 tournament, The Big Ten sent nine teams to the dance as a conference and received more than $35 million altogether from the six-year total of the tournament.
Therefore, a team can earn six units for its conference, one from the ECF and five by participating in the First Four and progressing to the Final Four.
Conclusion
The NCAA tournament is a big pool of money, with schools receiving between $28,240 and $56,48 per year. Over six years, the estimate is between $169,440 and $338,887.
The most beneficial aspect of the NCAA tournaments is qualifying and competing. To make more money is to win more games.
Frequently Asked Questions
When Did The NCAA Tournament Begin?
- The NCAA tournament started on 17th March 1939.
Where was the first NCAA tournament held?
- The first NCAA tournament was played in the old Patten Gymnasium on the Northwestern University campus in Evanston, Illinois on March 27, 1939.
What city hosted the first NCAA championship game?
- Greensboro hosted the first NCAA championship game, in 1974.
