Economics of the 2013 NCAA Tournament

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 2012 North Carolina earned 4 Units for the ACC by reaching the Regional Final, NC State earned three, Florida State earned two, and Duke and Virginia each earned one. 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 approximately $258,000.

  2007 2008 2009 2010 2011 2012 Total Value
North Carolina 4 5 5   4 4 22 $5,676,000
Duke 1 2 3 5 3 1 15 $3,870,000
Florida State     1 1 3 2 7 $1,806,000
Maryland 2   2 2     6 $1,548,000
Clemson   1 1 1 2   5 $1,290,000
Boston College 2   1       3 $774,000
Wake Forest     1 2     3 $774,000
Georgia Tech 1     2     3 $774,000
Virginia 2         1 3 $774,000
Miami   2         2 $516,000
Virginia Tech 2           2 $516,000
NC State           2 2 $516,000
  14 10 14 13 12 10 73 $18,834,000

Following last year’s tournament each ACC school received 1.57 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, NC State only brought in 516K. And by and large the ACC was propped up by UNC and Duke which accounted for half the revenue. In fact, those two and Florida State were the only schools which had a revenue generated greater than revenue received.