Forwarded this newsletter by someone in your network and want to receive it yourself? Subscribe here 

Got any feedback for me? Respond to this email or on social media (LinkedIn, Twitter).

Good Thursday Morning. 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. As we did last year, I’m bringing you three things from the boardroom I’m thinking about as we kick off the NCAA Tournaments.

• 🍸️ Impress Your Friends at Cocktail Party: Want to show off your sports knowledge in a public setting but don’t have time to read the deep dive? Hit the “Impress Your Friends at Cocktail Party” section at the bottom for a CliffsNotes of this week’s topic

• 🤯 “Whoa of the Week”: The annual budgets of the men’s programs in the NCAA Tournament

• 💪 Weekly Reminders that Sports are Awesome: March Madness started early for Alabama State

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 sports calendar, the most popular time of year for a man to get a vasectomy and take off work, and, on that note, the least productive time of the year for American workers (to the tune of $20 billion in lost productivity according to some reports).

For ball knowers, 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, each of your brackets will 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

Stating the 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.

The NCAA earns over $1 billion (70+%) of its nearly $1.4 billion in revenue from these three crazy weeks in March and April. Over $800 million of MM revenue comes from the CBS-Turner media deal for the men’s tournament, and ~$115 million comes from the new extension ESPN signed last year to cover Women’s March Madness (the tournament is the lead sport for a huge championships bundle the NCAA signed with ESPN last year). The rest is comprised of revenues from ticket sales and sponsorships.

While that’s a steep price to pay for the legacy media companies, there is value in both the men’s and women’s tournaments.

SBJ reports that CBS and TNT have sold out of virtually all inventory on the men’s side — no figures were reported, but they made well over $1 billion last year so we can assume it’s north of that figure.

On the women’s side, Forbes notes that ESPN has seen 156% growth in advertising revenue for this year’s tournament, its advertising value was comparable with the NFL’s Divisional Round games or the NBA Finals, and they sold out all ad inventory for championship game in December, three months before tip-off.

2. How does the money get divvied up in future years with the House settlement likely taking effect next year?

For a quick refresher, 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.

As I wrote about in last year’s March Madness primer, a question to ponder was what would happen to this system should a landmark case or settlement took place.

Well, we have now set the stage for this hypothetical to become a reality, as this year’s March Madness will be the last one before the new revenue sharing rules under the House settlement take effect next school year.

Most Power 4 schools are going to max out the $20 million revenue cap and spend about 90% (~$18 million) of their budgets on football and men’s basketball, so we will likely see shifts in how rosters are constructed and new schools emerge as consistent powers. As an example, it is not a coincidence that 14 of the 16 SEC schools made this year’s tournament and the conference has grown its basketball prominence a few years into the NIL Era. This concentrated spending will continue into the House era.

These unit-based payouts are going to become even more precious under the new rules, and it’s going to put more pressure on the mid majors and traditional basketball powers that don’t have major football (i.e., Big East schools) to allocate money to basketball to up their units and start the flywheel.

In a way, it could start to look like a European soccer model, with the clubs needing to spend to field a competitive team in order to make Europa or Champions League, which in turn generates the revenue necessary to keep said team together.

It’s a dangerous treadmill, but it’s one that aggressive coaches, athletic directors, and donors will gladly jump on for a shot at glory.

3. Can the women’s tournament continue its rapid ascension post-class of 2020?

As I wrote about after last year’s tournament, while there have been countless greats to come before them, the class of 2020, led by Caitlin Clark, reshaped the trajectory of women’s basketball.

The last two years saw incredible growth in every business metric for the women’s game, culminating in 18.7 million viewers (peaking at 24 million) watching last year’s final between South Carolina and Iowa.

To put that eye popping number in perspective, it not only outdrew the men’s final (~15 million), but it’s more than:

• All but four college football games in 2023

• Every World Series game since Game 7 of the 2019 WS

• Every NBA Finals game since G5 of 2017 NBA Finals

• Every Daytona 500 since 2006

• Every Masters final round

Following the departures of Clark, Angel Reese, and other stars to the WNBA, women’s basketball continued its upward path.

Led by superstars Paige Bueckers (UConn) and JuJu Watkins (USC) taking center stage, attendance was the second highest ever (behind last year), and ESPN reported that it had its most-watched women’s regular season ever since 2008-09, with viewership up 3% YoY and 41% over the year prior.

While it seems unlikely this year’s tournament will be able to replicate the storylines, drama, and star power of last year — and it’s frankly unfair to expect the same numbers when Clark’s gravitational pull is not there — the bar has been raised and the business case continues to grow stronger for networks to air women’s basketball in high value slots.

Lastly, due to new media rights deal driven by the successful growth of the women’s game, this is the first year that the women’s tournament has also introduced the previously mentioned units system. The pool will be $15M and will grow in subsequent years — $20M in 2026, $25M in 2027. This means each “unit” will be worth around $113K this season.

This is much smaller than the $226 million in the men’s 2024 pot, but it’s roughly the same proportion of revenue allocated from the media rights deal as the men’s tournament and is a major step forward in additional funding in the post-House world.

Buckle up for the madness, friends!

🤯 “Whoa” of the Week

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

1. Annual budgets of the Men’s Tournament teams charted

💪 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. A wild way to kick March Madness off earlier this week in the first play-in game, giving Alabama State its first NCAA tournament win in school history

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