This is the third of three parts. Part I explored the questions: (1) Is college basketball more stable economically -- or too dependent on television revenues -- as it continues to hunt for new finances? (2) Is college basketball really a "professional sport" or a "learning experience" for its student-athletes? (3) How should the college basketball industry respond to controversial "special revenue sources" such as gambling and alcohol? Part II examined the women's college basketball tournament and women's college basketball in general.
In 1939, 5,500 basketball fans watched Oregon edge Ohio State in the first NCAA Men's Division I Basketball Championship. By contrast, the past eight championship games have averaged 46,203 in such cavernous places as Atlanta's Georgia Dome, the Louisiana Superdome, the San Antonio Alamodome and St. Petersburg's Tropicana Field.
The tournament welcomed its 20 millionth fan during this year's March Madness -- and this amazing growth continues. Three business factors keep it growing: television, corporate revenue, and the economic impact on the host city.
Television and the Final Four
CBS continues to be happy with the results of its $6 billion, 11-year investment. The NCAA Tournament is clearly an unmitigated ratings success, beginning with the March 13 tournament selection show and its 14 percent increase from last year. The network averaged a 6.7/14 overnight Nielsen rating through the first eight days of the tournament --the highest overnight since 1993.
Last week's games raised the bar as well. The Michigan State-Kentucky overtime thriller rated the highest since 1990. Saturday's two overtime games marked the best rating day since 1995.
When CBS first made its $6 billion investment, Morgan Stanley predicted that the network might lose as much as $1.2 billion from its NCAA and NFL deals. CBS immediately requested $250 million in fees from its affiliates to defray costs, and began aggressively promoting long-term advertising packages. The strategy worked.
Most recently, Harris Corp. has become a high definition broadcast partner, providing HD coverage of 12 broadcasts, including the Final Four and championship games.
As a result of the CBS mega commitment, successful tournament performance means substantial dollars for major conferences. Nearly $200 million is distributed to 320 Division I schools -- much of the allocation is based on overall conference performance in the tournament over a five year period. Pressures to succeed are tremendous: a conference's take is more than $130,000 per tournament win, up from less than $100,000 two years ago.
Basketball revenue accounts for more than 50 percent of the net revenue for some conferences, about $2.4 million total for the 31 Division I leagues. Clearly, March Madness has major business implications for all conferences, all divisions -- and the 360,000+ NCAA student-athletes who participate.
Corporate revenue and the Final Four
Corporations are pleased with the return on their large March Madness investment. This bodes well for the future, as college basketball ad spending increased 9.7 percent last year to over $586 million. The NCAA relies on its bedrock "Corporate Champions" partners. Cingular Wireless, Coca-Cola, General Motors and others contribute over $35 million each for the premium sponsorship package. These companies are gravy on top of $5-$10 million NCAA corporate partners including Kraft and Hartford Financial.
