Economics of the 2018 NCAA basketball 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.

When the NCAA signed their first billion+ contract with CBS, the schools (especially the non-basketball powers) lobbied for a more equitable system to distribute that money than the free-for-all that was in place. Thus, the “basketball fund” was born.

The basketball fund shares most of the tournament revenue (after the NCAA brass take their cut) with every conference. And the conferences split that money with their members.

Every team that participates earns money based on the number of games they play. 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 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 what does this mean for FSU?

The tourney three years ago was the best in ACC history. The ACC played in 21 eligible games, which is remarkable, considering the previous year saw only nine games. Then 2016 happened. The ACC earned 25 units, which broke the 2009 Big East record of 24.

In 2017, the ACC earned a very respectable 18 units.

Regardless, here’s how that distribution looked after last year. Each unit from this year’s tournament is worth in the neighborhood of $273,000, though past units are not worth quite as much. For simplicity, we’ll average them out and assign each unit (game played) with a value of $260,000.

So last year’s conference distribution was $24,440,000, or $1,629,333 per team. FSU had brought in $1,040,000 over the six-year window, and thus was subsidized by ACC teams. Eight teams all brought in less than they received.

This year the 2012 results will drop out to be replaced by 2018. So it will be fun to watch Iona take down Duke, but if that happens it will cost the ‘Noles some cash.