March Madness is one of the largest, most popular, and most thrilling events in all sports. The recent cancellation of National Collegiate Athletic Association’s (NCAA) profitable basketball tournaments will undoubtedly threaten projected income from the most lucrative game in college sports. Yet, the event cancellation will have further-reaching effects.
The NCAA Cancels Basketball Championships
What Is March Madness?
The March Madness tournament was started by the National Association of Basketball Coaches (NABC) in 1939 and is now regulated by the National Collegiate Athletic Association (NCAA).
Sixty-eight teams compete in seven rounds over three weeks. It’s a single-elimination tournament meaning the loser of each round is instantly eliminated. The winner is crowned national champion, and UCLA currently holds the most wins at 11 championships.
March Madness Cancellation
This is the first-ever year that the NCAA Division I men’s basketball tournament has been canceled since its inception. The unavoidable decision was made mid-March.
Just a few weeks ago, the NCAA indicated that it had proposed to go ahead with the tournaments but without spectators in attendance.
After Utah Jazz player Rudy Gobert tested positive for COVID-19, it was impossible to see how the tournament could go ahead, even in empty arenas.
The decision was made to cancel the event and remaining winter and spring NCAA championships due to public health threats from the evolving COVID-19 epidemic. The regulators wanted to ensure they did not contribute to the spread of the virus.
Loss of Revenue
As one of the most popular sports in the U.S., the March madness event makes up a significant part of the NCAA’s annual revenue.
Usually, the tournament generates around $870 million per annum through television and marketing rights alone, and in 2019 it was estimated at $933 million factoring in sponsorship and ticket sales. The majority of revenue received by the NCAA comes from its television rights with CBS and Turner, who pay around $800 million each year.
The NCAA said that Division II and III decreases from last year would be around $30 million and $22 million respectively.
Since NCAA President Mark Emmert canceled the event, ticket revenue was permanently lost. Other championship events were also canceled, and the total losses are predicted to be in the tens of millions of dollars.
The NCAA governing board announced to distribute just $225 million, a massive reduction of over 60% of initially budgeted funds. Of the $225, $50 million will be paid from NCAA reserves. The amounts of the NCAA’s annual distribution allocation will differ by conference and school and is currently too early to tell who will get what.
Governors have emphasized to members the significance of “planning carefully with less revenue.” Associations must now accept the ambiguities of their financial situation and make careful decisions, including how they can support campuses and conferences.
The NCAA said it has a $270 million insurance policy against event cancellation that goes towards the distribution. Other lines of credit are also being sought.
Due to careful forward-focused planning, the association had prepared for an economic disaster and is said to be in a far better position because of their foresight.
The Wider Economic Impact
The economic impact on schools and conferences will be enormous. The financial future of many athletic departments could be in jeopardy.
The financial losses could be in the billions as restaurants, hotels, and other secondary tourism industries will not have the advantage of the arrival of basketball fans that have become a staple of the jamboree.
The economic impact of the cancellations will be felt by all kinds of parties, from non-revenue athletes to stadium workers. Local tavern owners and the hospitality industry, in general, will feel the hit, particularly at locations where teams were supposed to play.
March Madness tournaments typically generate around $10 billion in betting activity through online sportsbooks and betting shops. The American Gambling Association (AGA) purports the event as one of the most lucrative for Las Vegas-based casinos.
Sports clothing company giants like Nike and Adidas, who rely on the tournament for advertising revenue, have seen a drop off in stock price.
What Money Can't Buy
The worst-hit due to the tournament cancellation could be the players in their last year of eligibility who were hoping to build up their profiles before the NBA draft. Can a price be put on that loss?
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