Economics of the 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 FSU, and since the ACC splits the money evenly, are the Noles propping up other programs or vice versa?

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 an ACC team participates in is considered a ‘Unit’ (with the exception of the Final and the game following a play-in game). 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?

So in 2010 Duke earned 5 Units for the ACC by reaching the Final, whereas Maryland, WakeForest and Georgia Tech earned two apiece, and FloridaState and Clemson each earned 1. That totals 13. The table below shows that in the previous five Tournaments the ACC had totaled 63 Units, so that plus 13 made our distribution worth 76 Units. Each Unit last year was worth $222,206.
2005 2006 2007 2008 2009 2010 Total % Revenue
North Carolina 5 2 4 5 5 21 27.6  $  4,666,326
Duke 3 3 1 2 3 5 17 22.4  $  3,777,502
Boston College 3 2 1 6 7.9  $  1,333,236
Maryland 2 2 2 6 7.9  $  1,333,236
Wake Forest 2 1 2 5 6.6  $  1,111,030
Georgia Tech 2 1 2 5 6.6  $  1,111,030
NC State 3 2 5 6.6  $  1,111,030
Clemson 1 1 1 3 3.9  $     666,618
Virginia 2 2 2.6  $     444,412
Virginia Tech 2 2 2.6  $     444,412
Miami 2 2 2.6  $     444,412
Florida St 1 1 2 2.6  $     444,412
15 10 14 10 14 13 76  $16,887,656

 

 Following last year’s Tournament each ACC school received 1.4 million in cash (total revenue/12). As the table shows, FSU and three other schools brought in only 444K, 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 2005 Units will drop out, which is unfortunate as it was an above average year. The problem is that we’re only sending four teams to the dance this year, and one is stuck in a play-in game. Obviously a couple teams need to make a deep run. This year each Unit is projected to be worth $239,664.

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