How Money Is March Madness? A New Marketplace Podcast

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Our latest Freakonomics Radio on Marketplace podcast is called “How Money Is March Madness?”  (You can download/subscribe at iTunes, get the RSS feed, listen via the media player above, or read the transcript here.)

The gist: the annual NCAA basketball tournament grabs a lot of eyeballs, but turning them into dollars hasn’t always been easy — even when the “talent” is playing for free.

Last year, March Madness reportedly earned its highest TV ratings in 18 years. This year’s Super Bowl, meanwhile, was the third most-watched broadcast in TV history (behind two earlier Super Bowls), despite (or because of?) an electrical blackout. Interestingly — to me, at least — these two premier TV sporting events are sold very differently: the Super Bowl rotates annually among one of three networks while the NCAA is in the midst of a 14-year contract with CBS and Turner Sports. How does that difference affect ad revenue?

That’s one question we try to answer in this piece. In an earlier piece for the NFL Network, we looked at the economics of Super Bowl ad sales. In this piece, we lean on the research firm Kantar Media to see how March Madness measures up. Although he doesn’t appear in the podcast, Jon Swallen of Kantar was a font of information. He tells us that two years ago, CBS and Turner may have lost money on March Madness, as they pay roughly $770 million a year for broadcast rights but took in only $728 million in TV ad revenue. But last year, Swallen says, CBS and Turner — which broadcast ever single game in the tourney — took in more than $1 billion.

This makes March Madness “the most lucrative sports TV franchise in the country in terms of advertising revenue,” Swallen told us, “bigger than the Super Bowl, bigger than the entire NFL playoffs, and larger than the combined revenue that’s brought in from the Major League Baseball playoffs, plus the NBA, plus the National Hockey League.” That said, broadcasting every game in the tournament of course raises production costs as well, so it’s hard to know just how profitable the enterprise may be.

In the podcast, you’ll also hear from Northwestern economist Jeff Ely (he blogs here), who came up an auction system for Northwestern basketball tickets and thinks that the NCAA and NFL might do well to consider using an auction for selling ad slots. He has an even nuttier idea for how to raise more revenue, which I will not spoil here, but it has something to do with this.


Jaime

"Last year, March Madness reportedly earned its highest TV ratings in 18 years. This year’s Super Bowl, meanwhile, was the third most-watched broadcast in TV history"..

This is one of the most disinformative statements I have ever seen in this website (a merit to the high quality work you do on a very regular basis, but that I feel needs to be pointed out). What you said may be true in US history (something you do not bother to point out) but it is not, in any way, the most watched broadcast in the world. An estimated 715Million people watched the last football (soccer) world cup final, a similar number has been bounced around for Usain Bolt’s 100m final at the last London Olympics, as a matter of fact, even a relatively unknown sport, cricket, has more than 100 million viewers at the final of their world cup… just in India.
And I have not even left the sports domain, the number of viewers, considering the particularly strong Latin-American appeal of the latest papal inauguration easily trumps the 100Million figure.

Please, you do very good pieces here. I just beg you not fall down the pitfall of letting people believe that the US is the world…

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PP

"He tells us that two years ago, CBS and Turner may have lost money on March Madness, as they pay roughly $770 million a year for broadcast rights but took in only $728 billion in TV ad revenue."

I think your second number might be a bit high.

Stephen J. Dubner

Fixed (sheepishly). Thnx, SJD

Stuart Brannan

I think that CBS and Turner Sports made a financially correct decision in committing to a 14-year contract with the NCAA. As March Madness continually gets closer to the Final Four and the championship game, the amount of viewers steadily increases. Although they dish out $770 million a year to the NCAA for broadcasting rights, they took in more than $1 billion in profits last year, for a gross profit of around $230 million. Also as awareness of March Madness grows, and the number of ways to access the games via electronic devices increases, CBS and Turner Sports will earn even more revenue.

Harrison Mathews

The 14-year contract was definitely a wise decision by CBS and Turner Sports. They reportedly only make 728 million from revenue opposed to the 770 million they spend on broadcasting rights. Apparent though CBS and Turner Sports say that they make more than a billion which is a major leap. I don't know how that would be able to go under question, the amount of money they make. But even if it is a lie they must have a very good reason. To me March madness has definitely had a major leap in popularity within my community bringing even me into it when in previous year i don't think i watched single game, not even the championship.I feel that if they were toi lie about their contract revenue it might be an estimate for previous years and the fact that the NCAA tournament is just getting bigger and bringing in more revenue each year.

Steve Roach

"But the Super Bowl’s like the biggest sporting event on the planet, right?"

If you exclude those bits of the world that are outside US territory and are marked "Here be dragons" then, yes.

Of course, if you include the actual world, then I'm not sure that most people have heard of it. At least the World Cup has the decency to invite other countries (and Canada doesn't count).

Luka

I think it would be better to compare TV revenues from full sports seasons. March Madness is a lot of games; the Super Bowl is one. More people watch the NFL in the regular season than college basketball. Complete monetary valuation should encompass full seasons. More games=more revenue