Video: Putting big bucks on the Big Dance

By Reporter
CNBC
updated 3/15/2004 4:05:06 PM ET 2004-03-15T21:05:06

It's that time of year again. March Madness. The Big Dance. The NCAA college basketball tournament tips off this week, but it is more than just hoops and hoopla.

More than the office pools and school spirit that the tournament generates, March Madness is mostly about money: The money on the line for those who compete, and the money schools will put on their dancing shoes.

“There's no question that schools are spending a lot on their athletics program in Division 1-A,” said Wallace Renfro, NCAA’s special assistant to the president. “But we just completed a study of those institutions that finished and 2001, and one of the things that was clear was that institutions are spending between three and three-and-a-half percent of what University budgets are, so we don't have the tail wagging the dog.”

When Maryland won the NCAA tournament two seasons ago, they earned more than the rights to cut down the nets.

The school spends more than $3 million a year on its men's basketball team, and made big bucks in 2002.

Over the next three weeks, 65 teams will again go for the gold.

This year, March Madness will generate an estimated $425 million from the NCAA's television contract with CBS, ticket sales and sponsorships.

With about 60 percent of that money divvied up between conferences and teams, the pressure to have a winning team is greater than ever.

“If you’re one of those teams with a bad record and you’re getting a loser image, you try extra hard to get in the tournament, and you throw even more money at this proposition,” said Murray Sperber, a professor at the University of Indiana.

In fact, recent data suggest university spending on Division 1 sports increased 25 percent on average, compared to just a 10 percent rise for academics. Yet, fewer athletic programs are making enough to cover those costs.

In the 2001 NCAA report — the most recent — fewer than 20 percent of Division 1 schools turned a profit on their own, and the gap between the haves and the have-nots is getting larger.

“The schools that are showing a profit are showing more profits every year,” said Daniel Fulks, a financial consultant for the NCAA. “The schools that are losing money are losing more money every year.”

Yet, some schools believe spending is the only way to win. However, a study commissioned by the NCAA in August showed little connection between dollars and success.

All of this has some calling for reforms, but the NCAA said the perception that spending is out of control isn't backed up the data.

The NCAA also says, for legal reasons, there is little it can do to regulate how much schools spend on athletics, and that its real job is to keep schools informed so they can make more educated decisions.

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