Mar

20

Let the Madness Ensue…

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Unless you have been under a rock for the last week or so, you are probably well aware that the Division I NCAA Men’s Basketball Tournament aka “March Madness” has started and is in full swing.  Across the country millions of people have put on their best analysts hat and filled out countless brackets in an attempt to determine who the winner of arguably the single most exciting event in all of sports will be.  While none of us know for sure yet who the actual winner of the tournament will be, it is clear that the real winners will be the local economies of the tournament host cities, the NCAA, and the Universities themselves.

College basketball and the NCAA tournament are big business, huge business to be exact.  Each year the tournament has a handful of “corporate partners” ranging from car rental companies, to delivery services, even financial companies (no, not HMC Partners) paying millions of dollars in advertising fees to be a part of the big dance.  In 2010, CBS and Turner Broadcasting reached an agreement with the NCAA to receive joint broadcast rights for the tournament over the next 14 years for a cost of $10.8 billion dollars.  That’s right, $10.8 billion dollars or roughly $770 million per year to broadcast young adults aged 18-22 playing basketball.

The tournament kicked off last Tuesday, with a newly added “First Four” set of games, a result of increasing the tournament field from 64 to 68.  The NCAA tried to spin this expansion decision as a way to involve more teams and to give more schools and their student athletes the opportunity to experience “March Madness” firsthand.  If you believe that, then your rose colored glasses are still working as intended; however, I see things a bit differently.   The opportunity to play 4 more games equals nothing more to me than increased revenue for the NCAA, who uses this tournament as its main source of revenue throughout the year.  According to the NCAA, 96 percent of the revenue is funneled back into its student athletes, their schools, and is used to fund the championships for essentially every other sport.

The NCAA isn’t the only one benefitting from the new format and additional games however, the host city Datyon, OH is expected to feel a direct infusion of $4 million into their city’s economy.  Not shabby for two nights worth of work.  Some of the other cities fortunate enough to host games for this year’s tournament are expecting an even greater impact to their local economy.   The Greensboro Coliseum hosted games this past weekend for the 1st and 2nd round of the tournament and was expecting that to result in an added boost of nearly $15 million as a result.

The schools fortunate enough to make it into the tournament benefit a great deal financially as well.  Last year’s feel good story of the tournament was Virginia Commonwealth University, who most thought should not have made the tournament to begin with.  They saw their royalties jump 219% after their magical run from the play in game to the Final Four.  The royalty income during the fiscal quarter following last year’s tournament was greater than any full year in the university’s history.  Beyond merchandise sales, schools can also see the impact playing on such a national stage has on their application for new enrollments and their alumni’s willingness to increase donations.

As the tournament progresses into the later rounds and the storylines of Cinderella or David vs. Goliath continue to build, take a moment to try and fully understand the importance that the performance of a student athletes have on not only their future, but the financial well-being of their schools, the NCAA, and the local area that hosts their games. That’s a pretty heavy weight for anyone to carry around, especially to the kid who on average isn’t legally allowed to consume alcohol.

*Note:  On Wednesday, March 14th, during the “First Four” play-in round, the South Florida Bulls beat the California Golden Bears in the battle of Wall Street.  Could basketball be a future predictor of what’s to come in the markets?

Sources:

“Greensboro Ready for Thousands of Visitors for NCAA Tourney.”  March 13, 2012 by Devin Swartz and Brad Jones.  Myfox8.com.

March Madness brings business back home.  Invitation to Big Dance a Boon to Smaller Colleges and Universities.”  March 14, 2012.  By Sam Mamudi, MarketWatch.com.

“March Madness:  May the Most Profitable Team Win”  March 14, 2012, by Reuters  www.theatlantic.com


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Category: Economy, Staff News

About the Author ()

Jeff Herzig joined HMC Partners with 5 years of Customer Service and Sales experience in the Financial and Insurance industry. He is originally from Northern Virginia and graduated from the University of North Carolina at Greensboro (UNCG) with a Bachelor of Science degree in Business Administration, concentrating in Finance. Jeff is Series 7 and 63 securities registered with LPL Financial and holds his North Carolina Life and Health Insurance License. He is a Registered Administrative Associate with and securities offered through LPL Financial, Member FINRA/SIPC.

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