Big Money at the Big DanceRick Horrow and Karla Swatek
1. March Madness: NCAA Business Bracket
The selections have been made, the brackets and pencils are out, it's time to make those picks. In the middle of March, in the middle of the sports industry's premier business conference, the IMG World Congress of Sports presented by SportsBusiness Journal/SportsBusiness Daily, the Madness awaits, and change is in the almost-springtime air.
Already, the upsets are brewing, as for the first time pretty much ever North Carolina, Indiana, and UCLA, with a combined 21 national titles among them, are nowhere to be found on bracket printouts. Also MIA from the Big Dance are two-time champions UConn and Cincinnati—the organizers of the second-tier National Invitational Tournament have never been happier.
Since 1982, millions of basketball fans have tuned into CBS (CBS) for the year's premier hoops fortnight-plus; the network is in the middle of an 11-year, $6 billion rights contract with the NCAA that pays $545 million annually. Next year, that may well change, thanks to the biggest controversy to hit the tourney since Chris Webber's unfortunate 1993 time-out call that likely cost Michigan the championship: The NCAA is thinking about expanding the field of tournament teams to 96 from its current 65, a dance card CBS Sports President Sean McManus claims is too full for "one network to handle." In a recent USA Today poll, 80% of respondents said they are opposed to tournament expansion.
The network, meanwhile, has announced that it has sold all its available advertising inventory for its men's tournament coverage and that both pricing and sales volume are up from last year. Among automotive advertisers returning to the March fray are Nissan's (NSANY) Infiniti brand, which has replaced Pontiac as the "official car" of the tournament, and Audi, Mercedes (DAI), and embattled Toyota (TM). Meanwhile General Motors, according to sources, has "cut its commitment to the tournament … by roughly half," to $25 million this year.
CBS has also signed Capital One (COF) as the third presenting sponsor of its popular March Madness on Demand platform (MMOD), in addition to AT&T (T) and Coca-Cola (KO), and has also signed Kraft (KFT) as a new corporate partner. Other sports marketers and advertisers that will be active around the games on the hardwood leading up to the Final Four in Indianapolis include LG (LPL), Enterprise Rent-a-Car, State Farm, the Hartford (HIG), and Lowe's (LOW).
Louisville-based Papa John's (PZZA), the "Official Pizza of NCAA March Madness" thanks to a marketing deal with the collegiate association, has started a new marketing campaign that allows customers to designate $1 from each online order placed at www.papajohns.com to The V Foundation for Cancer Research and/or the Kay Yow/WBCA Cancer Fund. Papa John's expects to sell nearly 10 million pizzas during the NCAA tournament, a far from half-baked contribution to the two worthwhile cancer funds.
Distraction from Work
When they're not tied up ordering Papa John's for lunch, U.S. companies could waste as much as $1.8 billion in unproductive wages during the first week of the NCAA men's basketball tournament, according to the annual March Cassandra song of employment firm Challenger, Gray & Christmas. The figure is based on 58.3 million people participating in bracket challenges, with each person devoting 20 minutes to watching games and focusing on their pools.
Staffing service OfficeTeam, however, has released a contradicting survey conducted by an independent research firm and based on telephone interviews with senior managers at companies with 20 or more employees. According to 41% of 1,000 managers surveyed, morale-boosting activities and conversations surrounding the tournament have a positive effect. What's more, 56% said March Madness activities do not affect productivity, and 22% of respondents claim tournament involvement actually boosts workers' output.
Maybe one of these days CBS' MMOD platform won't even need to include its infamous "Boss Button", which instantly allows a hoops-immersed worker to shield the games with a spreadsheet if The Man wanders by.
This year, we've decided to take a different tack as we agonize over UTEP vs. Butler and Clemson vs. Montana. We're building our brackets based solely on participating schools' total athletic department revenues—meaning perennial big spenders Ohio State and Texas come out on top in Indianapolis, with Texas taking the title, and "First Four Out" institutions will be Alabama, Auburn, Michigan, and Penn State.
2. More Madness: Tech and TV
Every year the buckets of revenue accompanying March Madness coverage are increasingly migrating online. When the games commence this Thursday during work hours for most of America, CBS' March Madness on Demand is expected to generate about $37 million in online ad sales, a jump of roughly 20% from $30 million in 2009, according to estimates by sports media analysts.
CBSSports.com is also "projecting more than 10 million unique users for the 2010 version of March Madness On Demand," which would represent a 33% growth "from last year's 7.52 million unique users," according to SportsBusiness Journal, as well as "anticipating substantial jumps in video consumption" after posting 8.6 million hours of live audio and video last year.
If you liked the blue-skinned Na'vi from Pandora in Avatar, you'll probably love viewing the Blue Devils through 3D glasses as well. CBS Sports is planning to show the men's NCAA Final Four games in 3D, the network's first experiment with 3D technology and yet another mega sports event taking advantage of the platform. CBS has arranged with Cinedigm Digital Cinema to show Final Four games in 100 movie theaters nationwide.
From start to finish, information technology is making March Madness larger and more tech-savvy than ever. Technology companies are big boosters of March Madness as well as designing and running the platforms that keep millions of basketball fans enthralled. Chip maker Intel (INTC), for example, announced last Thursday it is planning a "major presence" during CBS' coverage of the tournament. According to the New York Times, Intel's ad campaign will play on its new Core family of processors by asking fans "for their 'core moments' from past games." The company is buying ad time on CBS, the CBS Sports site, MMOD broadband, CSTV, mobile media, and CBS Radio "in five large markets."
And as in the slew of collective bargaining agreements currently being negotiated in sports, hidden among the embarrassment of riches are many leverage plays. The NCAA's current 11-year broadcast agreement with CBS expires in 2013, but the association can opt out of the contract and put it up for bid on the open market in August. As the New York Daily News points out, if the contract goes to bid, the NCAA will expect much more than the $6 billion CBS is committed to paying. Even though the NCAA would have to forfeit the $2.1 billion left on the back end of the CBS deal, strong interest from ESPN and Turner Sports ups the hardwood ante, and other major players could step up to the line as well.
3. NCAA Tourney TV Contracts
In 1982, CBS purchased the TV rights to the NCAA men's basketball tournament. While the network home of the Final Four hasn't changed over the past 28 years, the cost of the tournament's rights has skyrocketed. Following is a list of CBS-NCAA deals since 1982:
2004-2013* 11 years, $6 billion ($545 million per)
1996-2003 8 years, $1.73 billion ($216 million per)
1991-1995 5 years, $715 million ($143 million per)
1988-1990 3 years, $165 million ($55 million per)
1985-1987 3 years, $96 million ($32 million per)
1982-1984 3 years, $48 million ($16 million per)
* NCAA retains the right to opt out of this contract by Aug. 31, 2010