March Madness: Beyond Basketball and Office Pools
We’ve all seen the reports that surface during NCAA men’s basketball tournament time that estimate employers will lose billions of dollars in productivity as workers focus on office pools instead of the tasks at hand.
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Who knows if the figures are actually accurate. But what is certain is that the National Collegiate Athletic Association’s 65-team tourney—better known as March Madness—is the Indianapolis-based entity’s largest revenue-generator, by far.
With all the corporate sponsorships tied to bowl games, NCAA Division I football raked in roughly $186 million last season. That still pales in comparison to this year’s $500 million basketball budget, of which CBS Sports chips in $420 million for broadcasting rights to the games. The bulk of the remainder comes from ticket sales.
This year the Final Four will be held in Indianapolis, home to the NCAA, April 1-3. The NCAA attributes the tournament’s increasing popularity to the decision in the mid-1980s to expanding the number of participating teams to 64—there now is a play-in game that pushes the number to 65—and the decision to broadcast early-round games to increase exposure.
“The wonderful thing about the tournament is that you don’t have to attend one of the participating schools to enjoy the games,” NCAA spokeswoman Gail Dent said. “It is definitely an exciting time that culminates with the semifinal and championship games.”
The expansion occurring in the 1980s led the basketball tournament to realize more than $100 million in revenue in 1991. The amount grew to $370 million by the end of the decade.
The contract with CBS is mainly responsible for the present growth. The 11-year television package began in 2002 and runs through 2013. The value increases about 7.5 percent a year, according to Keith Martin, NCAA managing director of finance.
The deal, in turn, has been a blessing for the network that lately has been ruling the Nielsen ratings with its CSI series. The tournament typically attracts more advertising dollars than baseball’s World Series or football’s Super Bowl, according to ad tracker TNS Media Intelligence.
During the 63-game span, advertisers will spend more than $500 million on television commercials, up from $310.6 million in 2000, according to TNS Media Intelligence. During the championship game, ads will go for more than $1 million.
But the money is hardly a windfall the NCAA simply pockets. Much of it is invested back into Division 1 basketball. For instance, in 2005, the association returned $298.7 to the 31 conferences. The Big 10 received $29.1 million, followed by the Big 12 and Big East, each with $24 million.
The amount distributed back to the conferences grows about 8 percent annually, Martin said. But don’t expect the Big Ten to pocket the most this year. The money is distributed based on how many teams make the tournament and how many wins they compile. This year, George Mason University’s surprise entry into the Final Four could increase the Colonial Conference’s take, which last year was just $6 million.
This year the NCAA switched auditors, from Deloitte & Touche to KPMG. The contract goes out for bid every three years.
“We try to look for firms that have a not-for-profit background,” Martin said, “and [KPMG] certainly met that criteria.”
KPMG declined to discuss the contract, citing client confidentiality.
The NCAA’s move in 1999, from Kansas City to Indianapolis, backed by numerous incentives, is paying dividends for the city. Indianapolis will host another men’s Final Four in 2010, and will be awarded a men’s and women’s Final Four every five years thereafter. The package coincides with the decision to build a retractable-roof stadium for the Indianapolis Colts that can play host to other events, such as basketball games.
The Final Four this year is expected to bring about $45 million to the city, according to the Indianapolis Convention and visitors Association. That includes hotel, dining, food and beverage, merchandise, shopping and transportation expenses.
“Aside from the economic impact, it’s exposure, exposure, exposure to people around the country,” Deputy Mayor Steve Campbell said. “It’s the road to Indianapolis. That’s advertising that’s hard to buy.”
Written by Scott Olson, AccountingWEB Contributer.
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