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Good Thursday Morning, and welcome to March Madness. Here’s the rundown of this week’s Sports Business Playbook:

• 📰 This Week’s Topic: March Madness is upon us. In addition to three amazing weeks of basketball, this is one of the most interesting business setups in all of sports. This week, I’m bringing you three things from the boardroom I’m thinking about as we kick off the NCAA Tournaments.

• 🤯 “Whoa of the Week”: The wild story of Shohei Ohtani’s interpreter getting fired for illegal gambling

• 💪 Weekly Reminders that Sports are Awesome: Long Beach State’s head coach Dan Monson is fired but still coaching his team in the NCAA Tournament

Hey team,

That long month in between the Super Bowl and now never gets easier for sports fans, but I have good news: we’ve made it, friends.

It’s called many things in the U.S. — the best weekend in the country, the most popular time for a vasectomy, and the least productive time for American workers.

For most, it’s simply “March Madness.”

We’ve got the first two rounds of the NCAA college basketball tournaments kicking off today, and we will be full tilt from there for the next three weeks.

Yes, your brackets will all be in shambles soon, but all is not lost.

Fortunately for you, you’ve got your Uncle SBP here to get you set for the tournament from the business side.

Here are three things I’m thinking about from the boardroom as we kick off March Madness.

1. Mad Money

This is obvious, but March Madness is a massive business for the NCAA, the media partners, and the conferences/schools.

The ecosystem is also incredibly dependent on the tournament for its revenues and budgets.

Nearly $1.1 billion (~85%) of the NCAA’s annual $1.29 billion revenue comes from MM, with ~$873 million coming from the CBS-Turner media deal for the men’s tournament (the rest is made up from ticket and sponsorship sales).

While that’s a steep price to pay for the legacy media companies — and it goes up next year by nearly $100 million when a new extension running from 2025-2032 kicks in — Sportico reports that the broadcast partners have already sold out ad inventory for the upcoming tournament and are set to make over $1 billion this year.

Lastly, the Division 1 conferences and schools rely upon payments from NCAA Tournament births as major revenue drivers.

The NCAA keeps about 40% of the MM revenue and distributes the remaining 60% to schools through a “basketball fund.”

The funds are distributed at the conference-level based upon how their teams played over the previous six tournaments. As with everything the NCAA does, it’s complicated. But, here’s the quick and dirty version:

• The key variable for conferences is a “unit.” Every game a conference’s team plays in an NCAA tournament earns one “unit” for its conference. More teams in the tournament mean more units, and more teams winning and advancing to play more games also mean more units.

• The conference can split up the money amongst the schools however it wants, but the NCAA suggests schools evenly split the payout (which usually happens).

• These units are paid out over six years, so their total value is the listed unit value multiplied by 6. As Andrew Petcash notes, in 2021, units were worth ~$340k per year, and they grow each year. He projects the lifetime value of a unit won in 2021 to likely be more than $3M. For mid-major conferences that do not have the major TV contracts, this is a key allocation of funds for their athletics budget.

2. What does the future of March Madness look like?

An interesting question to ponder is what this cash cow looks like in the coming years.

As I’ve written about a number of times before, there are legal landmines everywhere for the NCAA right now. Much of this litigation, as Michael McCann writes, is hammering away at the notion of “amateurism” and if athletes are employees who are entitled to a portion of the revenue generated.

It’s hard to see a world where they don’t end up in either a major settlement or landmark ruling that changes the face of collegiate athletics.

March Madness will largely remain the same on the court, but how the dollars get divvied up across the value chain off the court is most likely going to change — namely, players getting a cut.

Most of us would agree that the players getting paid their fair share is the right thing, but it’s important to note that there will be negative externalities with the implementation of a new revenue model.

Specifically, what happens to the sizable funds distributed to each conference, which trickles down to the schools. For the mid majors, this is often one of the major funding sources for their programs.

If a part of this revenue gets shifted to the players instead, we may see some smaller schools’ athletic departments having to make some hard decisions.

3. A Cinderella story with the women’s tournament

Can Caitlin Clark and Iowa survive the “Region of Death” (including a possible rematch of last year’s final with LSU in the Elite Eight 👀) and return to the Final Four?

Will the South Carolina freight train keep rolling and complete the perfect season?

Can a dark horse with freshman star power — i.e., Texas, USC, Notre Dame — emerge and make a run?

These are just a few of the storylines heading into the Women’s Tournament.

The Men’s Tournament always generates signature moments as the madness unfolds, but this year it feels like there are more compelling narratives heading into the tournament on the women’s side.

This is good news for the NCAA and the participating schools on the heels of an announcement of a major new TV deal with ESPN that bundles 40 NCAA championships, including the women’s tournament, for $115 million annually ($65 million is attributed to women’s basketball).

Assuming we get some of these storylines to play out and there are marquee matchups during the Final Four, it’s possible we could see ratings higher than last year’s record 9.9 million viewers and another round of sellouts.

One important point regarding the competing storylines: this is not a zero-sum game.

The growth of Women’s March Madness does not detract from the Men’s, and vice versa. The surge in popularity and the star power from the Women’s side only helps to further grow an already massive March Madness

In fact, I don’t believe we’re too far away from a shared Final Four weekend — men and women play on alternating days at the same site instead of in different cities as they do now.

Big things ahead. Cheers to the madness!

🤯 “Whoa” of the Week

Insane, mind-blowing things constantly happen in the sports business world. Here was my favorite of the past week.

1. This story about Shohei Ohtani’s interpreter getting fired due to illegal gambling is wild. $4.5 million transferred from Ohtani’s bank account to the bookmaker? Something smells fishy.

   And as always, PFT Commenter doesn’t miss (Tweet #2 below).

💪 Weekly Reminder that Sports are Awesome

This newsletter is, of course, mostly centered on the business side of sports and the things that happen off the field. That being said, it’s important to remember why we fell in love with sports in the first place, though.

This section is meant to highlight the amazing things that happened in sports this week that serve as that reminder.

1. Long Beach State coach Dan Monson was fired at the end of the regular season but then they won the conference tournament. So, he’s still coaching even though he’s fired.

Thanks for reading! Let me know what feedback you have.

Also, if you enjoyed this breakdown, please consider sharing it with your friends and network by clicking the social media icons at the top of the newsletter.

Until next time, sports fans!

-Alex