Each spring, the NCAA holds its 65-team tournament to determine the nation's top college basketball program. What began with little fanfare 70 years ago has since evolved into March Madness, one of the most anticipated annual events on the sporting calendar.
More than fun, it's big business. Office pools and other tournament wagers total some $2.5 billion each year according to Federal Bureau of Investigation estimates, while the lure of buzzer-beating shots and unlikely upsets attract a TV and Internet audience to CBS of 140 million over the course of the tournament.
It's also the lifeblood of college basketball. Schools that advance to the Final Four typically bring in a rich bounty from TV revenue and merchandise royalties. Success in the tournament is integral in boasting conference coffers and drawing more donations to the athletic department from alumni and fans; not to mention it raises an athletic department's profile, making it easier to recruit players, build new venues and sell more tickets and sponsorships in subsequent seasons.
Our second annual ranking of the Most Valuable College Basketball Teams is based on the money that men's basketball programs contribute to four important beneficiaries: their university (money generated by basketball that goes to the institution for academic purposes, including scholarship payments for basketball players); athletic department (the net profit generated by the basketball program retained by the department); conference (the distribution of post-season tournament revenue); and local communities (estimated incremental spending by visitors to the county that's attributable to the program).
The North Carolina Tar Heels, who reached the national semifinals in two of the past four years, is once again the most valuable team in college basketball, worth $25.9 million. Last year the Tar Heels generated $16.4 million of operating income (second to only Louisville's $16.6 million) making North Carolina one of only a handful of colleges that made more money from basketball than football. Tar Heel merchandise, including jerseys adorned with the numbers of famed alums like Michael Jordan and Vince Carter, outsold goods from the other 11 Atlantic Coast Conference schools for the 13th consecutive year.
The defending national champion Kansas Jayhawks moved up three spots to become the fifth most valuable team, worth $21.7 million. Basketball-related merchandise royalties, driven by sales of Final Four emblazoned products, totaled $2 million last year and accounted for 80 percent of the school's licensing business. The Jayhawks collected $10 million in gate receipts from 20 games at Allen Fieldhouse and posted an operating income (in the sense of revenues less operating expense) of $12.9 million. With revenues down across their conference last year, the Jayhawks were the only Big 12 team to make our list.
Athletic conferences receive annual payments from the NCAA's central basketball fund of more than $140 million based on the number of games their teams participate in during the NCAA tournament over a six-year rolling period. These payments, which are composed primarily by TV revenue, directly reward success on the court. The UCLA Bruins' consecutive Final Four appearances the last three years, for instance, will generate close to $18 million through 2013 for the Pac-10 conference, which will divvy up the money amongst its members. The Bruins' recent success has helped boost operating income 30 percent since 2006 and increase team value to $15.4 million.
The value of the top 20 teams increased by 3.4 percent last year to an average of $17.5 million, while operating income grew by 5.7 percent to an average of $10.8 million. Still, not all teams saw gains. Missouri dropped off our list as operating income tumbled 17 percent to $8.1 million after the team failed to qualify for last year's tournament.
Captured among revenues are ticket and concession sales, basketball broadcasting and sponsorship agreements, scheduling guarantees and money generated from hosting pre-season tournaments. Also included are donations that are required by some athletic departments in order to purchase season tickets. These "gifts" are significant--in some cases they add up to more than $7 million a year--and are often hidden within departmental accounting.
Operating expenses are composed primarily of coaches' compensation, travel expenses and game day costs. Keeping costs in check is important because big budgets limit the amount that a team can contribute to academics and support non-revenue sports like volleyball and crew. Duke University's expenses rose by 88 percent last year to $15 million ($5.7 million higher than any other team). As a result, the team's value dropped three spots to eighth overall, but is still worth $16.8 million thanks to a strong brand that has grown out of 10 Final Four appearances under head coach Mike Krzyzewski.