 Men’s college basketball is the NCAA’s cash cow. Yet some teams claim they actually lose money by participating in the Final Four. And in the short term, they may be right. The NCAA controls all collegiate championships with the exception of Division 1A football. The large football schools earned the right to stage their own championship, now called the BCS, after successfully suing the NCAA in 1984 under federal anti-trust laws. But almost 90 percent of the NCAA’s total revenue - $614 million in 2007-08 - is generated from staging just one of those championships: The men’s basketball tournament. The largest source of that revenue is the television rights fees paid by CBS and ESPN. The NCAA is quick to point out that only 5% of its total revenue is used for administrative expenses, with the remaining revenue distributed to member schools and conferences. Distribution is based on a number of factors, including such things as success in the tournament over a rolling period of six years, the number of athletic programs supported by individual schools, and special needs of student-athletes. But a number of Final Four participants, past and present, have voiced concerns over the NCAA’s policy of requiring schools to ante up for goods and services they don’t request, and in some cases, don’t want. Adding insult to injury, according to some, is that the number of tickets allocated to each team has been decreasing at the same time that the best seats in the house are being scalped - with the approval of the NCAA. This year, the NCAA provided Final Four participants with 3,750 tickets, down from 4,500 in 2003. Participating teams were also required to pay for 470 motel rooms, with a four-night minimum stay, and a $32,000 party, complete with choice of four types of finger foods and a cash bar. Decorations not included. But the issue that sparked the most controversy is the relationship between the NCAA and RazorGator, the California-based ticket reseller. While the NCAA has railed against ticket reselling in the past, this year it entered into an agreement with RazorGator to resell large blocks of tickets, some of them the best seats in the house. Those tickets were selling for a minimum of five times face value of $140-220. The NCAA declined to tell the Dallas Morning News how many tickets were available to RazorGator, how much revenue is generated by the arrangement, or how the revenue is divided between the company and the NCAA. The NCAA pays for the lion’s share of travel expenses for each tournament participant, but mandated costs mean some schools end up in the red. According to Texas athletic director DeLoss Dodds, the Longhorns lost $113,000 when the team played in the 2003 Final Four in New Orleans because it couldn’t sell all of its hotel rooms. And Oklahoma AD Joe Castiglione maintains the Sooners lost $200,000 by participating in the 2002 Final Four in Atlanta. It’s difficult to generate sympathy for any school that makes it to the Final Four. Losses are quickly recouped by increases in merchandise sales, endowment contributions, and enrollments. A study by George Mason Professor Robert Baker showed that his school’s Cinderella Final Four run in 2006 resulted in major increases in each of the above areas, along with an estimated $6.8 million in free media exposure. At many schools, men’s basketball generates more revenue and profit than the football program. The latest figures from the Department of Education covering the 2006-07 academic year show that Louisville led all schools in revenue and profit for men’s basketball with $23.2 million in revenue and profit of $17.1 million. Arizona was the second most profitable program at $13.2 million, followed by North Carolina with a profit of $11.6 million. Greg Sheehan, senior vice president of basketball and business strategies for the NCAA, said the non-profit agency is merely trying to simplify things for Final Four teams, so they won’t have to scramble for hotel and party space. But if discontent among the nation’s basketball elite becomes widespread, those schools may consider resorting to the anti-trust laws, just like their football brethren before them.
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Jordan I. Kobritz is a staff member of the Business of Sports Network. Kobritz has taught The Business of Sports/Sports Marketing & Management Eastern at New Mexico University, the University of Wyoming, St. Cloud State University, and Northern Arizona University. He has also taught Business Law/The Legal Environment of Business Keiser College eCampus, St. Cloud State University, University of Maine, and Husson College. He is the former owner of the Daytona Cubs Baseball Club, and the Maine Guides Baseball Club. He, as well as all others on the staff, can be contacted via the Authors Profiles page.
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