After a wave of news unprecedented in the history of college sports … of American sports … we are approaching the settling-in phase:
For our purposes, that means life without the NCAA men’s and women’s basketball tournaments, without most (if not all) spring football practices and games, without many Pro Day events for NFL scouts, without sports like baseball and softball.
Above and beyond the health and safety for all involved (athletes, coaches, administrators and the general public) and the emotional blow that comes with the absence of competition, the financial impact of the cancellations stands as a top-of-mind issue.
How will the shuttering of the NCAA tournament impact the multi-million payouts to the schools and conferences?
We don’t have a clear answer yet: Everything depends on the NCAA’s contracts with broadcast partners CBS and Turner, on the cancellation/insurance policies, on the NCAA’s reserve funds, etc.
But a few data points and procedural matters will help illuminate the situation:
- Each game played in March Madness by a member institution counts as one unit for that conference. If the Pac-12 had seven teams in the field and all seven lost in the first round, the conference would collect seven units. If all seven teams won their openers and lost in the second round, the conference would receive 14 units.
- The NCAA’s payout process works on a rolling six-year cycle, with a one-year delay. If the Pac-12 had earned 14 units this month, it would have been paid for those units for six years starting next spring, along with the units earned over the previous five tournaments. It would all be pooled into a lump sum.
- The value of the units increases annually. Each of the 14 hypothetical units earned this month by the Pac-12 would have been worth about $290,000 to the conference next spring — or about $4 million. And those 14 units would have been worth about $300,000 each in the spring of 2022, and so on. (The increase is about three percent per year.)
- When you combine units earned over six tournaments, at $300,000 per unit, the annual payout to the Pac-12 becomes significant (and is split equally among the 12 schools).
According to conference documents, the Pac-12 generated about $17 million in March Madness-related revenue in the 2018 fiscal year and approximately $18 million in 2019.
With as many as seven teams expected to receive bids this month, the number of units collected — and the resulting long-haul revenue — might have been substantial.
Will the shuttering of the tournament result in the payments scheduled for this spring (for units earned in 2014-19) being reduced or eliminated?
Or will the payments scheduled for next spring (for units earned in 2015-20) be impacted?
Again, that’s all to be resolved by the NCAA, CBS and Turner; the conferences are standing by for clarity.
Now, let’s add a bit of context:
The approximate $18 million in annual NCAA payouts received by the Pac-12 is significant, but it’s also a small slice of the conference’s overall cash haul.
This year, for example, the Pac-12 will generate about $500 million in revenue, with the vast majority coming from the ESPN and Fox contracts and the college football postseason (the Rose Bowl and the CFP).
In other words, March Madness accounts for less than 5 percent of the annual intake at the conference level, which is separate and distinct from the income generated at the campus level through ticket sales, donations, etc.
Rather, the NCAA tournament shutdown could have a much greater financial impact on leagues that don’t play football or have massive TV deals — the Big West and the West Coast Conference, for example.
Those conferences depend on March Madness units for a much larger percentage of their annual revenue.
The Hotline hopes to have more on the issue next week