The NCAA's $800 Million Cash Cow

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Hey Friends,

The 2022 NCAA men's tournament bracket was released yesterday, and we finally know the 68 teams that will compete for a championship — let the madness begin!

Gonzaga leads the way as the tournament’s #1 overall seed, with the Arizona Wildcats, Baylor Bears, and Kansas Jayhawks rounding out the remaining top seeds.

Here’s the entire 68-team bracket:

We could play Monday morning quarterback and debate the bracket for hours.

Should the SEC Champion Tennessee Volunteers be higher than a #3 seed? Did SMU have a good enough resume to be included? How about Texas A&M and Dayton?

These are all fair questions, and I’m sure they will be debated by industry pundits for hours on end this week, but I think our time this morning is better served digging into the financials of the tournament itself — so let’s have a look.

March Madness Is The NCAA’s Cash Cow

When Rudy Gobert tested positive for COVID-19 before tip-off of the Jazz-Thunder game on March 11th, 2020, the NBA suspended its season indefinitely. This caused an ensuing ripple effect throughout sports that no one could have predicted.

The men’s and women’s NCAA tournament was scheduled to tip-off later that week, and the organization was forced to shut it down just 5 days before it was set to begin.

But here’s why this was a big deal — the NCAA makes more than 80% of their annual $1B+ in revenue from “March Madness” related sources, including broadcasting rights, ticket sales, merchandise, concessions, and more.

And the crazy part is that it’s still growing at a ridiculous rate.

For example, the NCAA’s broadcast deal with CBS & Turner has increased 300% since 2000, going from ~$200 million in 2004 to ~$800 million annually today.

Now it wasn’t all bad news for the NCAA. They had five insurance policies in place that covered event cancellation and were able to recover $270 million in cash — that is believed to be the single largest event cancellation insurance payout in history.

Still, only $225 million of an anticipated $600 million marked for NCAA member schools was then distributed. That's approximately 40 cents on the dollar in a business where only about 10% of the athletic departments actually turn a profit.

NCAA Annual Revenue

• 2019: $1.12 billion

• 2020: $519 million

• 2021: $1.15 billion

For those keeping score at home, the NCAA saw a 54% decline in revenue without the annual basketball tournament in 2020.

But with the organization setting a new revenue record last year, despite only allowing 25% capacity throughout the 2021 NCAA men’s basketball tournament, they will surely look to set another new revenue record this year as they return to 100% capacity.

CBS Sports & Turner Sell Over $1 Billion In TV Ads

We all know the Super Bowl is the holy grail of TV advertising, right?

Well, that’s true, but it might surprise you that the annual NCAA men’s basketball tournament is second in line when it comes to national TV advertising spend, ahead of the NBA and MLB playoffs and the college football playoff.

In total, CBS Sports and Turner are paying about $770 million for the rights to this year’s tournament but have already sold out on over $1.3 billion of TV ad inventory.

This is a new record for the NCAA’s TV partners.

And for additional context, a 30-second ad during the Super Bowl went for $6.5 million this year, while early NCAA tournament games go for a few hundred thousand dollars and rise to $2 million or more during the actual National Championship game.

Again, the NCAA men’s basketball tournament is a bonafide cash cow.

I hope everyone has a great day, and we’ll talk tomorrow.

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Extra Credit: Tom Brady announced on Twitter last night that he is ending his 40-day retirement and returning to the Tampa Bay Buccaneers for his 23rd NFL season.

But while most football fans rejoiced that they would get to watch the greatest quarterback of all time continue his career, one fan was presumably VERY upset.

Why? Because he purchased Tom Brady’s final career touchdown ball for over $500,000 at auction…the night before Brady announced that he was unretiring.

And when he wakes up this morning, that same touchdown ball is now only worth about $15,000 — that’s a 97% drop in price in less than 36 hours. Ouch.