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It is about this time of year that Ken Shropshire remembers his college days at Stanford in the 1970s, where his most intense studying was done on a grid of brackets.
“Back then, not everyone did it, just people who were really into sports,” says Shropshire, a former college football player and now director of the Wharton Sports Business Initiative, referring to the frenzy of picking teams to win the NCAA college basketball tournament games. “These days, every other email is about getting into a pool or about a team someone picked that ruined their pool. The tournament has become an influential phenomenon.”
Notwithstanding the flow of money into betting pools, the tournament that climaxes with the Final Four this weekend has a huge economic footprint for television, the National Collegiate Athletic Association (NCAA), advertisers and the colleges that are part of the tournament. Interest over recent decades in the “brackets” — a term used for the grids that separate the 65 teams in the tournament into 16 different groupings — and in the eventual winners has greatly increased the tournament’s economic impact.
In 1985, when Villanova University, an eighth-seeded regional team, went on to win the whole tournament, CBS paid $27 million to telecast the games. With 65 teams in the tournament since 2001, CBS is now in the midst of a 13-year, $6 billion contract, heavily back loaded so that in the next three years, it will be paying $2.13 billion for the rights.
Furthermore, in 1985, the cable inroad into television ratings had barely started. Any event that managed to get onto broadcast television was guaranteed respectable ratings. Indeed, the fact that the NCAA basketball tournament is still a highly-rated television event makes it almost unique — up there perhaps with only the Super Bowl, the Oscars and the President’s State of the Union message.
“It has clearly become one of the tent pole properties for CBS,” notes Scott Rosner, a lecturer in legal studies and business ethics, and associate director of the Wharton Sports Business Initiative. “It offers CBS a captive audience [in a] very hard to reach demographic — the 18- to 34-year-old males who congregate around no other property like they do around sports. When you have one of those tent poles … this is important to a network.”
The tournament is also important to the NCAA, as Wharton marketing professor Eric T. Bradlow points out, noting that this tournament brings in 90% of the organization’s revenues. “There is nothing like this. College football barely touches it on TV. And the impact on those colleges that get to participate goes far beyond the money they receive from the NCAA for the telecast.”
Colleges get direct payments from the telecast based on a complicated formula that takes into account the school’s athletic conference, how many teams from that conference make it to the tournament and how far each advances. Sometimes, these payments are split evenly throughout the conference, allotted even to those teams that do not make the tournament. For example, Morgan State University, one of the lesser teams in the tournament, got $291,000 for appearing last year. The 12 schools in the Atlantic Coast Conference — which includes last year’s winner, the University of North Carolina — evenly split a hefty $15,863,538.
The money generated by the tournament has some speculating that the NCAA may soon expand the current 65 teams to 96, or even 128, essentially adding one weekend to the tournament schedule — much like the enhanced professional baseball and football playoffs did by adding “wild card” teams that had not won division championships.
The speculation gained steam this year because the NCAA has an opt-out clause in its television contract with CBS on July 31. The obvious competitor would be ESPN, since the network already broadcasts hundreds of college games during the season. “College sports is a significant part of the culture of our company, and we have a wonderful position in college basketball,” John Skipper, ESPN executive vice president for content, told The New York Times in early March. “We love our involvement, and it feels somewhat unfulfilling to stop before the end of the year.”
But Rosner, for one, thinks it is unlikely that the tournament would ramp up its number of participants just to secure another weekend of telecasts. At a conference he attended in Los Angeles earlier this year held by the World Congress of Sports, “with a few hundred people [from] all parts of the industry, the question was posed: ‘How many people think it is a good idea to expand to 96 teams?’ Not a hand went up. No one thought it was a good idea, including me.”
He states that the growth would add luster only to existing big conferences because they control the lion’s share of the revenue from TV as it is. This year, the Big East qualified eight teams. “Adding, say, Connecticut [a marginal Big East team], would not do much to enhance the tournament,” Rosner notes. The tournament would end up having teams with 15-12 records that don’t really offer the Cinderella story line provided this year by the University of Northern Iowa, St. Mary’s and Cornell.
“You can say, too, that the Cinderella lines are great, but in the end, the NCAA wants Kansas and Kentucky and the better teams because that is where the box office is,” Rosner adds. “You go to 96 teams and there is just more chance that a perennially good team people want to see isn’t there at the end.”
The Big Dance isn’t overly exclusive to begin with — the 65 teams that currently participate equal about 19% of the total 343 Division I basketball schools. Still, says Shropshire, there are far more teams that actually win a significant number of games in this tournament than if there were a similar type of NCAA college football playoff. For example, “You wouldn’t see Cornell or Northern Iowa winning anything in football. There are realistically not that many schools that will win in football. In basketball, it is much more exciting, which is why television will pay billions to air it.”
The ‘Doug Flutie’ Effect
Bradlow has studied whether the exposure a school gets from winning an NCAA game or set of games does, in fact, offer substantial benefits for the participating schools. His conclusion: There is some substance behind the hoopla, especially at colleges that have been successful for the first time. “We call it the ‘Doug Flutie Effect,’ for the time Boston College quarterback Flutie threw a miraculous pass to win a game in 1984,” says Bradlow. “Applications spiked there, but not particularly better quality applicants.”
Bradlow found that no matter what conference or type of school, applications and awareness went up when a school won surprise games in the tournament. “It is a lot less prevalent in other sports,” he says, noting that the Flutie game took place before the NCAA Tournament became as popular as it is today. “I think that is because there are so few teams that have a chance of winning a big football bowl game. In recent years, only Boise State has been added to that list. But in the first round this year, for instance, there were Murray State, Cornell, St. Mary’s and Northern Iowa. I’ll bet each will see spikes in applications.”
In fact, that is what the darling of the tournament in 2006, George Mason University, discovered. George Mason professor of education and human development Robert Baker did a study over the two years that followed the school’s success after reaching the final round of eight in the NCAA tournament, and found that applications went up 22% the next year, with out-of-state applications increasing 40%. Bookstore sales, which include purchases of school-related apparel, for March 2006 equaled those of the entire year before. Athletic alumni contributions increased 52% in the following year. Baker estimates that, if you add up the time the team appeared on TV and was written about in print, the university had $677,474,659 in free media “advertising.”
“We believed we had things in a good trajectory here, but the NCAA run certainly accelerated it,” says Baker, noting that George Mason, which was founded as a northern campus of the University of Virginia in 1957, is particularly well-known for its economics department, which has two Nobel Prize-winners. “What we found [to be] even better was that every time our coach, Jim Larranaga, was interviewed, he [would] say good things about the university in general. There is no way we, as a university, could have bought that publicity.”
Similarly, the University of Northern Iowa, which draws 80% of its students from in-state, saw its Facebook page grow from 12,000 subscribers to 14,600 the weekend the Panthers beat top-seeded Kansas in this year’s tournament. “The public awareness that we exist has increased 100-fold,” notes Terry Hogan, Northern Iowa’s vice president for student affairs. By beating Kansas, the team played in St. Louis, one of its primary recruiting areas, the following week. “Our goals are modest, but the impact on our university should be great in all ways.”
According to Rosner, not only would relatively unknown schools like George Mason and Northern Iowa benefit from the NCAA exposure, but also schools that already have a national reputation, like Cornell, the first Ivy League team to win its first two tournament games since the University of Pennsylvania in 1979. “Will [test] scores of applicants go up at Cornell? Maybe not,” he says. “But you have to think that a kid who might have applied to Penn or Northwestern or Stanford to combine athletics with a good education may now say, ‘Hey, what about Cornell?’ There is really no other venue for this, even for Cornell. I’m sure coaches and administrators all over the Ivy League are envious.”
Even into the 1950s, the NCAA tournament took a back seat to the post-season National Invitation Tournament (NIT), which was played entirely in New York, while the NCAA championship often ended up in a far smaller media market, like Kansas City. The NCAA now owns the NIT, which it bought for $56.5 million in 2005, and operates it as a sort of runner-up tourney, with relatively little publicity.
Shropshire suggests that the 1979 final — which pitted first-time participant Indiana State University, headed by Larry Bird, against heavy favorite Michigan State, with all-Americans Greg Kelser and Magic Johnson — transformed the tournament into a huge phenomenon. The story line was overwhelming, and TV was ready for it. “It was at the end of a long run by UCLA, and basketball was [gaining in] popularity. There was a need for heroes and good stories. These players and teams provided it. That translated to bigger TV contracts in the long run.”
Shropshire is unsure about the plan to expand into more teams, but he notes that the NCAA has clearly been looking for a bigger take at the ticket booth. In 1985, a fan could walk up and buy a $25 ticket to the 20,000-seat arena at the University of Kentucky, in rather remote Lexington, to see Villanova defeat Georgetown in a dramatic final game. Last year, StubHub, the online reseller of tickets, posted an average ticket price of $437 to see the Final Four at Detroit’s 78,000-seat Ford Field. In 1997, the NCAA said it would only hold the Final Four in arenas with capacities of more than 40,000. Last year, the minimum went up to 70,000.
“That means only the places with a Dallas-Cowboys-like covered football field will have it now,” says Shropshire. “But I know the Philadelphia Sports Congress is always trying to get a regional. It is at a time, in March, when there may not be other conventions…. I was watching some games that happened to be in Jacksonville [Fla.]. The announcers … would always say something nice about the city. It is one of those few events that seems to have no downside and a decent economic upside.”
Sports marketing consultant Craig Kaplan, president of MilkBoy Communications in Ardmore, Pa., says he sees even more potential for the tournament to make money using the Internet and social media networks like Facebook. “What I would do now is have all sorts of links to potential stories,” says Kaplan. “Who is that guy off the bench who just scored a few points? What about the school — what else does it have? People watching these games want to know more, and there is a real potential with the web to provide it. They don’t have to expand to 96 teams; just give more information and earn more money that way.”
In the end, says Rosner, it is up to the NCAA — and whoever its TV partner is — to enhance what has become a unique property without diluting it.”My guess is that it will expand to 68 teams, with four play-in games for each of the number one seeds to play against in the first round,” he predicts. “The NCAA has a responsibility to its biggest members, not [necessarily] the Winthrops and the Northern Iowas. But any way it can make money for them, it will. Right now, the tournament is at the height of its popularity. I hope [the NCAA] doesn’t go too far and kill what is good about it.”