Money Talks: What do schools earn from participating in March Madness?

Although March is a few months away, the tip-off of the college basketball season has me excited again for one of the greatest postseason tournaments in sports. 

Unlike its restrictive football counterpart, March Madness includes a wide array of teams in each conference. Nowhere else would I get to see teams like Oral Roberts and UMBC from relatively unknown conferences knock off powerhouse programs like Ohio State. 

With USC getting into the AP Poll this week, ranked at No. 25, I got extra motivated to look into the future. Even though the Trojans lost Evan Mobley, who is currently dominating in the NBA for the Cleveland Cavaliers, this USC team looks poised to make another tournament run.

All of this hype got me interested in the money that schools receive for getting into March Madness. For traditional powerhouse conferences like the Pac 12, Big 12, ACC and Big 10, the money they get from the tournament is nothing new. 

But for the smaller conferences and programs that qualify, this money can be particularly important for their future. 

It’s important to understand that the schools themselves don’t get the money, but rather their respective conferences decide, and then the conferences give it out to their member schools. 

Moreover, the way that the money gets distributed isn’t simply by increasing the value as teams get further along in the tournament. 

Rather, the NCAA has its own unique system where they payout from a basketball fund. What does this fund compose of, you may ask? Well, it consists of many revenue sources that you would traditionally think of such as television, marketing, general sales and more. Additionally, the NCAA gives funds to conferences based on units instead of giving a dollar value up front. 

The amount for a unit changes every year, but has consistently increased over time (around by 3% per year). For example, a unit was worth $264,859 in the 2017 edition of the tournament. 

Now, the distributed units are not based on the conference’s performance of that payout year. Instead, the NCAA provides these units based on the conference’s performance in March Madness over a previous six-year rolling period. 

I know this sounds kind of confusing, so let me explain with an example. 

Let’s take this upcoming 2022 tournament, for instance. In this case, the NCAA will actually base how many units it provides to the conferences based on their performance from the 2016 tournament to the 2021 tournament. Rather than awarding money due to a single tournament performance, the NCAA awards it for long-term consistency among conferences. 

Conferences have been able to rack up large sums through this unit system. 

For example, the ACC made around $33 million in 2015 through its 21 units. Therefore, expect the Pac-12 to be earning some large amounts after last year’s tournament sending four teams (USC, UCLA, Oregon State, Oregon) to the Sweet 16 and three of them to the Elite 8. 

On another note, once these conferences receive their money, they are highly encouraged to distribute it equally among their member schools. Although some critics will say some schools who don’t really contribute to the conference’s athletics success are still reaping the benefits, it is a good way to keep unity among the member programs. 

Conferences such as the Colonial Athletic Association, which includes schools like William & Mary, Drexel and Hofstra, split half of the money equally and then give the remaining half based on merit through its “Excellence Fund.” 

Therefore, there are potential strategies to give funds out in a more competitive manner rather than awarding everyone equally, but I don’t know how much the big-name conferences will actually implement such a methodology.

USC and the Pac-12 can hopefully make another run in the tournament to get more units for the conference in the future. 

Pratik Thakur is a junior writing about business in the world of college sports. His column, “Money Talks,” runs every other Wednesday.