NCAA Faces Financial Cliff if March Madness is Cancelled Again

Following the COVID-19 cancellation of the NCAA’s Division I men’s and the women’s basketball tournaments this past March, the NCAA doled out $400 million dollars from their cash reserves to member institutions to help fund ongoing athletic operations. That left the NCAA in the same place as many of their member institutions – cash strapped.

While the focus has been on football and the slow, progressive cancellation and postponement of all other Fall sports to this point, with basketball – the NCAA’s other huge moneymaker that isn’t football – slated to tip off in less than three months, it’s right now when we should be asking questions like what if the NCAA and its members have to cancel March Madness yet again this season? And could there be long term consequences for the sport?

The NCAA generates nearly one billion dollars from the March Madness between ticket sales, merchandise sales, and TV agreements with CBS and Turner. The NCAA also depends on the basketball tournament for nearly all of its annual operating revenue with more than half of its revenue going directly to Division I schools and conferences. The NCAA receives another $170 million from other championships and the NIT tournament. About $600 million of that money is distributed to schools and conferences. So, while the Power-5 schools groan about the possible loss of fall football, all the other D1 members, including DU, could be severely impacted if COVID-19 cancels the NCAA Basketball Tournament for yet another season.

DU qualifies annually for a number of NCAA Tournaments in a variety of sports and the NCAA funds generated from March Madness cover the travel, accommodations, and trip expenses associated with those championships. The problem for Denver, as well as other universities, will be if the NCAA loses yet another season of hoops revenue. With the possibility of no revenue, it will be increasingly difficult for schools to fund their athletic department expenses in an already uncertain environment.

Like football, what happens if some basketball conferences elect not to participate in the tournament while other schools play? Do conferences receive a different payout depending on participating in the tournament? Not to mention the possible impact on TV rights and payouts by the networks if several high profile programs or conferences bypass the tournament.

Furthermore, with a vulnerable NCAA, could the Power-5 conferences (ACC, SEC, Big 12, Big 10, and PAC 12) be looking at the billion-dollar hoops revenue and consider breaking away in football and basketball? Add rising cost-of-attendance student-athlete stipends and new Name, Image, and Likeness guidelines which may further cause a fissure between Power 5 programs and mid-major Division I programs. While the Power 5 may not be able to capture the current billion-dollar hoops revenue mark, they would likely generate a greater return than they do now and they could use those funds to directly power their other programs as well. That would leave DI schools cut in half with the Power-5 controlling the cash and ‘all others’ trying to create TV and media deals to cover their cost of operation.

Let’s just hope that college basketball can make it to and through March Madness this season, otherwise, collegiate athletics could be forever changed.

4 thoughts on “NCAA Faces Financial Cliff if March Madness is Cancelled Again”

  1. The majority of Universities and Colleges in this country are in a financially precarious position due to the pandemic and at the vast majority of institutions, athletic departments lose money even under ‘normal’ times

    Don’t get me wrong, I like my college sports and college hockey in particular, but if at the end, the power 5 turn into pro-sponsored minor leagues in football and hoops (they essentially are) and the surviving institutions are more like D-3, it won’t be a problem. I went to a D-3 college in northern NY ( a long time ago) and hockey games were at least as exciting (although not as talented) as DU games (which I have been going to for 20 years).

    Not hoping for this, but I think with all the focus on impact of pandemic on college sports folks are losing site that colleges in general might go under (and not just a few weak ones).

  2. DU is not in danger of going under, but there is going to be more financial damage to both the school and to DU athletics before this pandemic is over, that is certain.

    The big question is how much?

    The best case scenario right now is that DU opens next month and is able, by quickly learning from the mistakes of other schools’ re-openings, to minimize COVID-19 infections on campus, and minimizing gap year deferrals and undergraduate melt. In this scenario, let’s say fall sports get pushed to spring, and hockey and hoops start in January, with 50% fan capacity. Certainly, this best case scenario means a loss to DU of millions.

    But the prospect of a further covid outbreak, lost enrollment and room and board revenue and missing the entire DU sports season would be a very serious loss in the multi-millions. That means DU is going to have take an axe to the school as we know it. Academics are going to be stripped down, and so will sports and administration, with losses in the multi-millions. I don’t see DU having to go DIII, but I do see a pretty bare-bones D-I operation until enrollment is restored…

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