The NCAA doesn’t use money from national championships to advance its mission
By: Gerald Gurney, Donna A. Lopiano, and Andrew Zimbalist
The following is an excerpt from Unwinding Madness: What Went Wrong with College Sports and How to Fix it.
The NCAA makes most of its money by owning and selling marketing rights to its national championships; most of the remainder is derived from national championship gate receipts. The NCAA currently sponsors eighty-nine championships in twenty-three sports. Some of these postseason tournaments are restricted to competitive division members and some are “open” to teams from any member institution. The bulk of current NCAA revenues is derived from the sixty-eight-team, single-elimination, Division I national basketball championship, branded “March Madness,” which culminates in a four-team championship playoff weekend, the “Final Four.” This property generates an average of $771 million annually in NCAA media rights fees over a fourteen- year period. Gate receipts and sponsorships from the tournament add over $100 million in additional revenue. In 2012–13, 84 percent of the NCAA’s total revenues of $912 million were derived from March Madness. (In April 2016, the NCAA extended their March Madness television contract to cover 2026–33. While the annual average rights fee increases to $1.1 billion, in present value terms the value is below that of the current deal at any reasonable discount rate.)
A small percentage of that revenue is used to operate the NCAA’s national office, including putting on the championship events. But in the end, more than 90 cents of every dollar the NCAA generates is returned to member institutions, either for specified purposes to support student-athletes or unrestricted, in the case of revenues distributed based on Division I basketball championship participation.
The Division I revenue distribution to member institutions is for the following specified purposes: basketball fund ($205 million, 38 percent of total), student-athlete athletic grants in aid ($136 million, 25 percent), special student assistance ($80 million, 15 percent), sports sponsorship ($69 million, 13 percent), academic enhancement ($27 million, 5 percent), conference grants ($9 million, 2 percent), and supplemental support ($19 million, 3 percent). The basketball fund is a payoff system to conferences based on the finish of their teams in March Madness over a six- year rolling period. The conferences subsequently determine how to distribute this money among their member institutions. To its credit, the NCAA has significantly reduced the amount of distribution that is based on winning postseason basketball games and has increased amounts dedicated to reimbursing institutions for their athletic program expenditures on important student-athlete benefits, such as academic support programs, scholarships, and sports operating costs. However, the $200-million-plus portion based on basketball tournament participation is still very substantial. The nonbasketball fund distributions are fixed amounts in some cases, such as for academic enhancement (the same amount is provided to each Division I member), and based on program size in other cases, as for sports sponsorships and scholarships.
The NCAA has established a revenue distribution system that is dominated by the philosophy of returning the most money to the members responsible for earning that money, a for-profit business mentality, rather than by expectations that it should act as a tax-exempt, nonprofit association with an educational mission. The NCAA owns its national championships. The revenues derived from these championships are not used to best advance the mission of the organization, benefiting all of its members and all student-athletes, but rather to disproportionately benefit the athletes in the most commercialized programs. The NCAA has not adopted a nonprofit philosophical position — for instance, that all national association revenues should be used in a way that contributes to the education, health, and welfare of the greatest number of student-athletes. Institutions with commercialized athletic programs earn significant revenues from their own regular season contests and shares of conference championships. National championship revenues do not assist all NCAA member institutions equally. In contrast, most conferences divide their revenue equally among its members, after allocations for the costs of participating in postseason games.
For the March Madness men’s tournament in 2016, the athletic conference of each participating school received approximately $260,000 for each round of the tournament in which it participated, up to the last round. Thus, a school going all the way to the finals could earn its conference $1.56 million in 2016. In addition, the $1.56 million would also be paid out in each of the next five years, so the total earnings from going to the finals would be $9.36 million — a handsome payout. In sharp contrast, and inexplicably, the NCAA pays out nothing to the participants in the women’s March Madness tournament.
Notably, the NCAA does not sponsor an FBS football championship. The College Football Playoff, a four-team playoff accepted by the public as the FBS national championship, began in 2014–15 and is the sequel to the Bowl Championship Series and its two-team championship, which existed from 1998 through 2013. The value of the new four-team College Football Playoff is in excess of $600 million per year, and it is owned jointly by all FBS conferences plus Notre Dame, rather than by the NCAA. These College Football Playoff proceeds are not equally shared among all FBS members. The sixty-five Power Five conference members take home 75 percent of the proceeds, and the remaining 25 percent is distributed to the sixty remaining institutions via other FBS conferences except for the $2.34 million that is distributed to some Football Championship Subdivision (FCS) conferences. The average revenue to each of the Power Five conferences in 2014–15 was approximately $70 million from the playoff system, compared to approximately $30 million in 2013–14, the final year of the Bowl Championship Series. The NCAA FCS championship is a sixteen-team tournament. Thus, it is reasonable to assume that it is only a matter of time before the College Football Playoff is expanded to eight teams or more, which would most likely increase its approximate value to more than $1 billion per year.
The fact that almost half of all NCAA revenues and 75 percent of all College Football Playoff revenues go to the Power Five conferences (representing just sixty-five out of 350 schools in Division I or out of more than 1,000 schools association-wide) reveals the dominance of highly commercialized and educationally questionable Division I football and basketball programs. These conferences have intentionally acted to control NCAA distributions and keep most of the revenues from the College Football Playoffs for themselves. The goal of the sixty-five Power Five conference institutions is clear: they want to win, and most will spend whatever it takes in their effort to build winning teams, all while maintaining a resource advantage over 94 percent of all other NCAA member institutions.
Learn more and purchase the book Unwinding Madness: What Went Wrong with College Sports and How to Fix it.
