If you spent money for any of these 10 regional semifinal doubleheaders, you spent wisely.

Economics of the 2012 NCAA tounament

The tournament is a cash cow for the NCAA. Since it owns and controls the tournament the NCAA does not have to split revenue with corporate sponsors as in football and baseball, and as a result over 90% of the NCAA operating budget is derived from this event alone. The NCAA in turn shares most of the revenue with every conference that participates. But what does this mean for your school?

Every team that participates earns money. But the NCAA didn’t want announcers doing their best golf imitation and informing the viewers how many dollars were on the line for each late game free throw. So they instituted a six-year rolling window where the conference results are averaged across this year’s event and the previous five, which diminishes the value of any one game. Every game that a team participates in is considered a ‘Unit’ (with the exception of the Final). So each team can earn a maximum of five Units in any one Tournament, and the value of each Unit is determined by the Revenue Distribution Plan written by the NCAA. Got it?

Let’s use the ACC as an example. So in 2011 North Carolina earned 4 Units for the ACC by reaching the Regional Final, whereas Duke and Florida State earned three apiece, and Clemson earned 2. That totals 12. The table below shows that in the previous five Tournaments the ACC had totaled 61 Units, so that plus 12 made the ACC distribution worth 73 Units. Each unit last year was worth $239,664.

2006 2007 2008 2009 2010 2011 Total Value
North Carolina 2 4 5 5 4 20 $4,793,280
Duke 3 1 2 3 5 3 17 $4,074,288
Boston College 3 2 1 6 $1,437,984
Maryland 2 2 2 6 $1,437,984
Clemson 1 1 1 2 5 $1,198,320
Florida State 1 1 3 5 $1,198,320
Wake Forest 1 2 3 $718,992
Georgia Tech 1 2 3 $718,992
Miami 2 2 $479,328
Virginia Tech 2 2 $479,328
Virginia 2 2 $479,328
NC State 2 2 $479,328
10 14 10 14 13 12 73 $17,495,472

Following last year’s tournament each ACC school received 1.46 million in cash (total revenue/12) (*note, number not entirely accurate as the value of the units change every year, but you get the idea. It’s close). As the table shows, Miami, Virginia Tech, Virginia and NC State only brought in 480K. And by and large the ACC was propped up by UNC and Duke which accounted for half the revenue. In fact, they were the only two schools which had a revenue generated greater than revenue received.

This year the 2006 Units will drop out, which is fortunate as it was an below average year. So far five Units have been earned this year, with three more coming today. If two of those teams advance, then the ACC will be guaranteed to generate as many Units as they are losing from 2006. This year each Unit is projected to be worth $258,502.