Hot Reads: Financial Toll of No March Madness Comes into Focus
Photo Credit: John S. Peterson

Hot Reads: Financial Toll of No March Madness Comes into Focus

March 27, 2020

A few weeks ago, the NCAA was planning to distribute $600 million in revenue to its member institutions. Due to the cancellation of all winter and spring sports championships, including the lucrative men's basketball tournament, the NCAA Board of Governors unanimously approved a reduced payout of $225 million on Thursday.

“We are living in unprecedented times not only for higher education, but for the entire nation and around the globe as we face the COVID-19 public health crisis,” said Michael V. Drake, chair of the board and president of The Ohio State University, in the release. “As an Association, we must acknowledge the uncertainties of our financial situation and continue to make thoughtful and prudent decisions on how we can assist conferences and campuses in supporting student-athletes now and into the future.”

The NCAA receives more than $800 million annually for the television rights to the men's basketball tournament–the event was insured for $270 million–but that's not all it missed out on due to this public health crisis. For fiscal year 2016–17 the NCAA reported nearly $130 million in revenue from ticket sales at its championship events.  Of the 90 championship events the NCAA hosts, just four, in addition to men's basketball, operate in the black––men's ice hockey, men's lacrosse, wrestling and the College World Series. All of those events were canceled as well.

The Board of Governors announced that it was distributing $53.6 million through the Equal Conference Fund, which is divided equally among the 32 Division I basketball conferences and then divvied out to schools from there. (Conferences are "encouraged, but not required, to" distribute that revenue equally among schools.) Of note, that's almost exactly the amount distributed to the ECF last year, giving schools at least one budget line item that might look somewhat normal.

Almost everything else, however, will not.

This isn't good for any athletic department, and the long-ranging impacts may take a while to become evident, but Nebraska could be better off than most. Per the USA Today database, Nebraska was one of 12 schools that reported taking $0 in "student fees, direct and indirect institutional support and state money," i.e. funds not generated by athletic functions. Nebraska has been in that spot for a while, even when it wasn't receiving a full slice of the enormous Big Ten TV rights pie. The Huskers received their first full share in fiscal year 2018, nearly $51 million, which resulted in an 18% increase in revenue over the previous year.

According to Department of Education reports, which differ slightly from those reported by USA Today, Nebraska's athletic department reported $130.3 million in revenue for fiscal year 2018 with $118.2 million in expenses. Of that $12.1 million surplus, $10.6 million was distributed back to the university to fund non-athletic scholarships among other academic pursuits.

This isn't a rosy picture for athletic departments further down the food chain, but it's unlikely to be easy even for the powers that be in the Power 5 conferences. As TV revenues have increased, particularly in the Big Ten and SEC, most schools have reinvested that money. It wasn't just piling up, it was going to new facilities, expanded recruiting departments, water slides, lazy rivers and whatever else that might offer a competitive advantage.

We might see the ramifications of those decisions soon. Nebraska, for example, reported $94.3 million in football revenue for 2018 against $34.6 million in football expenses according to the DOE. That surplus, $59.7 million, was used to help fund all athletic operations with the $12.1 million left over at the end, which was mostly sent back to the university.

Florida State, however, reported $68.9 million in football revenue, all of which was put back into the football program. At least on paper. Like a lot of schools, FSU's expenses equaled its revenue for the athletic department as a whole. In 2018, 26 of the 65 Power 5 athletic departments reported spending every dollar their sports made. Another 11 reported a revenue surplus of less than 2%.

Nebraska had the 10th-highest revenue surplus for fiscal year 2018 at 10.22%.

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