THE BLOG
03/27/2013 06:44 pm ET Updated May 27, 2013

March Madness Packs an Economic Wallop

From school yards to office buildings all across this country millions
of people are involved in basketball predictions as the circus known
as "March Madness" has come to
town. Sixty eight college teams are competing for the right to be
crowned champion of the U.S. in men's basketball.

The games have begun and the economic bonanza will follow. Billions of
dollars will change hands among bettors and the NCAA and its schools
will be rewarded with riches.

The first source of revenue is broadcast rights. In 2010 CBS Sports
and Time Warner's Turner Broadcasting signed a $10.8 billion deal to
broadcast every game of the men's basketball tournament for 14 years.
Time Warner and CBS will split coverage until 2024. That is more than
$770 million per year, which is a percentage increase of 1,877 percent over
the last 30 years. In 1982, CBS paid just under $50 million for three
years of rights. Adding the inflation value to the CBS 1982 package,
the comparison is $39 million a year compared to $770 million. The
NCAA itself will bring in $777 million this year, 90 percent of which comes
from the tournament television and other media rights. Last year $478
million of the revenue went back to Division 1 schools, with more than
a third of that based on the schools' success in the tournament.

In 2011, according to Kantar Media, CBS and Turner were able to
generate $738 million in advertising for the tournament. GM was the
top advertiser and they spent almost $58 million in advertising the
March Madness event. The cost of an ad for the championship game was
$1.24 million. This year, the expansion in content platforms allows
fans to watch the games on live streaming on their computer, mobile
phone, tablets and cellular phones. Last year, there was a $3.99 fee
to watch all the games on the March Madness app. The high point in
viewership for the tourney was over 30 million fans that watched the
1992 final game featuring Michigan versus Duke.

The Universities benefit mightily in the exposure. When Virginia
Commonwealth University made the 2011 Final Four, donations to its
athletic department gained 376 percent and overall giving to the school by
46 percent. Alums remember their university allegiance and feel pride when
their team is involved. After Butler University made it to the finals
in 2010, their applications increased 41 percent and the value of the
publicity and exposure they received was estimated at $639 million.
Coaches have bonuses in their contracts for making the tournament-the
University of Florida's Billy Donovan receives $37,500.The host city
will be a beneficiary. More than 75,000 fans packed the Superdome last
year in New Orleans. That marked the first hosting by the Superdome
of the event since Hurricane Katrina. The mayor's office estimates
that the games infused $134 million into the city. Regional host
cities also benefit.

It is gambling that generates the most economic
activity. The Final Four is second only to the Super Bowl in terms of the amount of
wagers placed in Las Vegas with some $80 million wagered. That is an
infinitesimal percentage of the overall dollars wagered as this event
reaches far beyond hard-core college basketball fans to reach into
every sector of American life. Estimates are that some $12 billion
will change hands over the course of the tournament.

And what do the actual participants in this event -- the players --
receive? They have a scholarship that at a school like Duke, costs
around $228,000 for four years. Of course the most talented players in
college basketball attend school for one year now and then enter the
pros. Is the system fair to players? You decide.