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Cheung: NCAA doles out tournament profits unevenly between conferences

After Monday’s NCAA basketball championship game, one winner will get to cut the net and be crowned the best team in America. But financially, many teams will win money from the NCAA. And some teams will lose out.

It’s common knowledge that teams win money from success in the basketball Tournament. In 2014, TV contracts brought in $700 million. Of that sum, $498 million went to Division I schools for academic programs and financial assistance for student athletes. The remaining $194 million went to what is called a “basketball fund,” which is a prize pot for the taking in the Tournament.

This year the pot has grown to $199 million, which begs the question, “How is the pie split up?” It’s a wonderfully complex system. Almost a financial Rube Goldberg machine. It has certainly relieved the old stress of having to win a game or go home empty handed, but the system still rewards the strong conferences with a lot of money and leaves crumbs for the struggling conferences.

So here’s how it works on paper: Teams earn a “unit” for every Tournament game they play, not including the championship game. Each unit has a set value, determined by the NCAA. For this year’s Tournament, each unit is projected to be worth $255,379. For example, Tom Izzo’s Michigan State team won five games to make it to this year’s Final Four and therefore netted five units worth a total of just under $1.3 million.

But the earnings from those units are not given directly to the school. They’re given to the conference, which then gets to distribute the money as it pleases among that conference’s schools. So Michigan State’s $1.3 million in earnings will go to the Big Ten Conference, which will then cut up the money and distribute it amongst the conference’s 14 schools. The NCAA suggests that the conferences evenly split the winnings among the schools.



Still following? OK good, because it gets weirder. The units last for six years, and every year the NCAA counts how many units are held by a conference and pays out the earnings accordingly. By spreading out the payment installments, the NCAA effectively dilutes the value of each game won in the tournament. And assuming the units grow in value every year, Michigan State’s five units will bring the Big Ten Conference an estimated $8.33 million through 2019. But at the end of this year’s Tournament the Big Ten will only see $1.3 million of that.

Prior to the “basketball fund,” schools that won the tournament would win ridiculous sums of money right away. Back then, the rule was that a winning school would get to keep 25 percent of the revenue and give 75 percent of the revenue to the conference. That sounds nice if you’re a winning team but if you went to the Big Dance and didn’t win a game, you had no chance at making any money. A missed free throw to lose a game would cost a program $300,000 by some calculations. The new system allows schools to win money even if they flubbed or performed poorly in the Tournament. So Syracuse should be happy that Duke made it so far in the Tournament because ACC wins mean more money for Jim Boeheim’s camp.

But this system only helps if you’re in a good conference. In 2012, the Big East — in its prime — netted almost $29 million. That makes sense because the best teams in the country — Syracuse, Georgetown, Louisville, etc. — were in that conference and won many conference games in the six year prior to that. Compare that to the West Coast Conference, which won only about $5 million that year because Gonzaga is the only good team in the league.

Based on the current system, if Gonzaga can’t win units, there are no other teams to help win money for the West Coast Conference. But even if Gonzaga does win units, the earnings are shared evenly with all the bad teams in the conference.

You can see that this would incentivize teams to leave weaker conferences for better conferences in which other good teams can still win money for the others. That’s what happened to the Horizon League — both Xavier and Butler left for the Atlantic 10 two years ago. Both schools were a foundation for the Horizon League, but their units will expire in 2016 and leave the conference stranded to find new teams to earn them revenue.

If the NCAA is interested in increasing competition and leveling out the playing field, it should consider a system that rewards smaller conferences with bigger prizes. And while it’s at that, if it could draw me a flowchart of how this all works that would be helpful, too.

Brian Cheung is a senior broadcast and digital journalism and finance dual major. His column appears weekly. He can be reached at [email protected] and followed on Twitter @bcheungz.





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