It’s one of the biggest sport events of the year — with more eligible teams than there are countries in the Olympics, more minutes played than the World Series, and more beer and buffalo wings consumed than the Super Bowl.
While a full accounting of the economic impact is impossible, the NCAA men’s basketball championship series is surely one of the biggest money-making sporting events as well. And this year, with all-you-can-eat cable TV premium packages and expanded live coverage on the Web, fans will have more ways to watch more hours than ever before.
“Baseball season hasn’t started yet, the NBA season is just getting set to close and no one even knows if there a hockey league any more. For that moment, the NCAA owns the sports landscape,” said Paul Swangard, managing director of the Warsaw Sports Marketing Center at the University of Oregon “That’s really hard to accomplish in this day and age when there do much competition and so many diversions for people.”
With all that attention focused on the sport, it’s a wonder viewers can get any work done. In fact, various studies have attempted to quantify just how big a productivity hit is felt every March by Corporate America.
One such estimate, by outplacement firm Challenger, Gray & Christmas, estimates the impact this year on the bottom lines of American companies could reach nearly $900 million. (To come up with that number, the firm starts with NCAA’s estimate of 22.9 million people who call themselves big college basketball fans, and then figures that 14.3 million of those hard-core fans are employed. If each of those fans is distracted by the games for just 13 minutes of work a day over 16 days, the total impact could reach $889.6 million.)
With all that undivided attention on the Big Dance, a lot more money — potentially hundreds of millions of dollar, but no one knows for sure — flows though thousands of betting pools set up in offices, college dorms and on the Web. Part of the allure is the uncertainty inherent in the fast-moving elimination schedule; those with little expertise often fare as well or better in the pools than the most die-hard, statistics-riddled fans.
“For all the football pools and all that sort of stuff, this is far and away the largest event in terms of gambling interest in the country,” said Victor Matheson an economics professor at College of the Holy Cross who has written about the economic impact of March Madness.
The 127-game event is also the centerpiece of one of the biggest single sports deals in history: CBS’s $6 billion, 11-year package of broadcast and marketing rights with the NCAA. The total package includes some 87 championship games across 22 college sports, but the men’s basketball tournament is clearly the prize.
For three weeks in March, the NCAA tournament pretty much enjoys the undivided attention of sports fans everywhere. Matheson said that by bundling the huge rights package — some 90 percent of which represents March Madness — the basketball tournament subsidizes most of the NCAA championship playoffs in other sports.
As in years past, CBS Sports will generate vast majority of revenue to cover that huge contract by selling conventional 30-second TV spots to advertisers — at prices of less than $100,000 for early rounds to as much as $1 million for the final match-up in St. Louis. CBS has also signed up a handful of big-spending corporate sponsors who get to slap their logo on a full package of events and merchandise — much like “official” Olympic sponsor. Coca-Cola paid a reported $500 million to lock up one of those slots for the life of the deal. Other major corporate sponsors include Cingular and General Motors.
Along with the perennial flow of beer commercials, this year’s advertising line-up will include marketing programs designed to capture the bounce in viewing from hordes of young male viewers of the games — a group that's highly sought by advertisers. Coca-Cola plans to pump up promotion of its PowerAde sports drink. General Motors will roll out a new “March Madness” sale that includes a $1,000 cash rebate. Sneaker maker New Balance will hit the airwaves with a new campaign to try to catch up with sales leaders Nike, Reebok and Adidas.
But the “arms race” among major media companies bidding for mega sports events has pushed the price tag beyond levels where conventional advertising and marketing revenues make the deal a sure bet.
“As a general rule, for most sport rights deals you have to find other ways to justify the upfront cost beyond just the advertising that comes in return,” said Swangard.
In the past, broadcast networks have justified money-losing sports deals by pointing to the prestige these events bring to the network and the promotional value of touting new shows. Now, with rights fees rising every year over the life of the contract, CBS this year is trying to expand distribution — via digital cable television, satellite television and Web-casting over the Internet — to help make back its investment.
One of those new sources of revenue will come from selling subscription packages that include all games — allowing homesick fans to watch a favorite team in an early round game that would be otherwise unavailable in a given market. For $59, DirecTv subscribers can buy a “Mega March Madness” package that lets them watch up to 37 games. Some CBS affiliates have also teamed up with cable operators to offer multiple games to subscribers with digital cable boxes.
And this year, the third year of offering live coverage on the Web, CBS is teaming up with College Sports Television, a private firm that launched two years ago. CSTV is selling $20 subscriptions for live streaming video of the games — in return for an undisclosed rights fee paid to CBS. (CSTV will also offer game highlights for free, generating additional revenue by selling video ad spots that will run with those highlights.)
“It has the potential largest live sporting event ever on the Internet; in a lot of ways, it’s the perfect storm for broadband,” said Brian Bedol, CSTV's CEO. “College sport fans don’t want to watch what they don’t want to watch. If you don’t care about Ohio State, no longer is that the game you have to watch.”
Fans can also sign up for the Webcast package at CBS Sportline.com and NCAA.com, where they'll be redirected to CSTV's Web site. Bedol says the site is expecting between 50,000 or 100,000 simultaneous streams and is set up to handle more.
Even if a million people sign up, that would represent just a tiny fraction of the revenue generated by television ad sales. And no one suggests that Webcasting will supplant the experience of big screen television viewing any time soon. In fact, makers of high definition sets could see a bounce in sales ahead of the tournament: CBS plans to broadcast 39 games this year in high definition — up from 12 last year.
But for devoted fans — some of them stuck at work behind a computer when their favorite teams are playing — new distribution platforms like Web casting offer one more way to keep up with the frenzy of dozens of games played simultaneously over several days.
“Its going to get even bigger,” said Swangard. “The next iteration is going to be the delivery of some of this content down to a cellphone or a wireless device and being able to provide fans that sort of real time experience without having to be in front of a TV.”
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