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NCAA basketball March Madness: Even top seeds lose money

Top teams in the tournament should generate hundreds of millions for colleges. But almost all March Madness teams lose money. What gives?

Fill out your brackets, find an excuse to stay home from work – March Madness is officially under way.

While college players are running layup drills in their sleep, the National Collegiate Athletic Association has already made its game-winning shot: a $6.1 billion, 11-year deal with network CBS to air the men’s basketball tournament, signed in 1999. This year alone, the NCAA expects to rake in $638.9 million from media rights, virtually all of it from men’s basketball.

So, with all that cash rolling in, basketball must be a moneymaker for colleges and universities, right?

Nope. Most college basketball teams lose money.

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How about championship-caliber teams?

Not really. “If you look at basketball teams as a stand-alone company, virtually none of the teams come out ahead,” says Andrew Zimbalist, a sports economist at Smith College in Northampton, Mass.

So where does all that CBS money go?

First, there’s the cost of running the tournaments themselves – the facilities, travel, referees, etc. That’s about 10 percent of the NCAA’s $600 million, says Victor Matheson, an economist at Holy Cross College in Worcester, Mass.

The rest is redistributed back to the NCAA schools.

A large chunk gets divided equally among members, regardless of their performance.

“Holy Cross gets the same amount of money as a big school like Ohio State,” says Professor Matheson.

That money will help subsidize the school’s other sports but even then won’t cover the cost of running a college’s entire athletic program. The school will have to pick up the remaining tab.

Other sports, like men’s lacrosse and hockey bring in a little money, says Matheson, mostly in the form of ticket sales. But most do not.

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The cost of staging the Division III swimming championship? That money comes from the big sports like basketball.

There is some financial advantage to winning. Another chunk of the NCAA’s media money – estimated at $167 million this year – is redistributed back to the individual conferences based on how well they have done in previous years’ men’s basketball tournaments.

Each conference gets one NCAA share – worth $222,000 this year – for each game their member teams appear in during March Madness. The further a team advances, the more shares (and money) its conference receives.

For example, the Big East Conference, of which mighty University of Connecticut is a member, had its 16 teams appear in 104 tournament games over the last six seasons. That means it’s entitled to $23.1 million from the NCAA this year. The conference will then distribute that money as its sees fit.

So very successful basketball teams can reap more money.

But the expenses of being successful are also high: coaching salaries, recruiting costs, tutoring and player scholarships – not to mention facilities, which aren’t included in most teams’ accounting. The coach of last year’s NCAA tournament winner — Roy Williams of North Carolina — earns more than $1.5 million a year.

Only about 2 percent of the Division I teams come out ahead, says Professor Zimbalist. “It’s not a very good investment to say, ‘I’m going to put money into a basketball team to go to Final Four.’ ”