We’ve barely begun to scratch the surface on the countless ways the Covid-19 outbreak will impact higher education. It’s safe to assume that canceling the NCAA men’s basketball tournament, along with the entire spring sports schedule, affects more than just the athletes who won’t get a chance to complete their seasons.
The NCAA tournament is easily the biggest moneymaker of the entire year for the NCAA, and for most of the NCAA’s DI membership. What does canceling the tournament really mean? Does it impact every DI school the same way? To better understand, I reached out to Brett Albert, a faculty lecturer at the Isenberg School of Management at UMass Amherst, Dr. Anthony Weaver, an associate professor of sport management at Elon University, and Dr. Karen Weaver, an associate clinical professor of sport management at Drexel University.
First, there’s the question of much immediate revenue a school might lose by not having an NCAA tournament.
The NCAA shares some tournament revenue with DI conferences in “units”. The more teams a conference sends to the tournament, and the more games they win, the more units a conference earns, which means more money. A single unit is worth roughly $300,000 a year, paid out over six years.
A huge, Power Five program could weather some bad NCAA tournament luck without facing an existential threat to their athletic budget. According to Albert, “a Big Ten or a Big 12 team, they have the college football playoff revenue stream coming in, they have major broadcast contracts with Fox and ESPN and ABC ... they are diversified enough that they could take a hit, since the NCAA tournament is a relatively low percentage of most of their athletic budgets. But we get down to those mid majors and low majors, their exposure to financial risk grows.”
Anthony Weaver agreed: “Approximately $300,000 distributed annually over six years is about $1.8 million, and if you’re a basketball centric conference, where your reliance on this revenue is greater, losing out on that money is going to hit home a lot quicker.”
The specific timing for some leagues couldn’t have been worse. Dayton was primed to earn a 1 or 2 seed, which means that their conference, the A-10, could have earned three units, or more if Dayton made the deep NCAA run their seeding would have predicted. Those units could have been worth more than $6 million dollars over six years for the league, which would have been shares among league membership. The Mountain West, with Utah State earning an auto-bid and with San Diego State almost certain to have earned a No. 1 seed, could have earned even more. Now, they’ll get nothing.
Albert believes this is one reason why some school leaders were pushing the NCAA to release a bracket, even without a tournament. “Really, what they were trying to say is that, you know, the Big Ten by Joe Lunardi, his recent projection, was supposed to have 10 bids. So we should be paid out as if we had the 10 bids. And then taking the argument further, maybe on the A-10 side, they could point to, ‘Look Dayton was going to be a No. 1 seed, looking at historical probabilities, we should be paid out for multiple units.”
Some basketball-centric conferences, like the WCC and Big East, will still earn some revenue from media broadcast rights, but for the bulk of DI leagues that do not sponsor football, those revenues are middling, at best. For a league like the Patriot or America East, these units may be their best shot at a big payday.
But it isn’t just money these schools are missing
Without an NCAA tournament, there’s no chance a mid-major darling will capture the hearts of America, and thus their wallets, this March. There’s a documented phenomenon called the “Flutie Effect”, in which a school enjoys a boost in enrollment, applications and alumni engagement after unexpected athletic success. Programs like George Mason, Loyola-Chicago, VCU and Butler have recently benefited deep March runs that extend way beyond their athletic department balance sheets.
“So in this sense, it’s not just that these mid and low majors are losing out on a budgetary item this year,” Albert said. “You just see these kind of positive spillover effects all across the board for these schools. And no matter how the NCAA figures out their payment structure for this year, there’s no way of getting that without actually staging a tournament.”
How could schools make up this money?
The NCAA used to have a cash reserve fund that could have been used in this sort of situation, but it was mostly spent to offset the costs of attendance for member schools, and for NCAA legal fees. But theoretically, the NCAA could borrow money, perhaps against future NCAA tournament earnings, and pay out a bonus to schools this year. All three experts I spoke to said this possibility may be worth exploring.
Karen Weaver added that athletic departments may also look inward. “Colleges generally have the ability to create and make internal loans as well as usable prices, but sometimes they’re four percent interest, you know, and they tend to be generous with payback periods of time. But there’s no question that there will be an expectation that some movement will be made towards paying those internal loans back.”
Financial hardship may look different at different types of schools
There are lots of different kinds of universities among the mid- and low-major ranks of DI. You have regional public institutions, many of which serve a more commuter type of student. You have selective, small-enrollment private schools. You have HBCUs. You have a few private schools, like Grand Canyon and Liberty, with robust online enrollments. Some schools have big endowments, and others don’t. Interruptions in athletics funding can be more problematic for some than others.
Many schools were already facing stiff economic headwinds, as enrollments have been in decline throughout most of the country. Any school whose athletic budget is heavily funded by institutional subsidy could be more at risk if their athletic department revenues unexpectedly drop.
Could this massive shock force schools to revaluate how they fund college sports? Could some decide to reclassify, or drop out of DI?
Karen Weaver doesn’t think reclassification is on the table for most schools, but thinks thinks some of those deeper conversations about college athletics funding have already been going on, as schools wonder if they’re willing to make the facility investments needed to compete in athletics. “For so long, it was just, ‘Oh, we’re just gonna add a track program.’ And now, you wonder, are you willing to invest a million dollars in upgrading that track?”
Albert wasn’t sure if the economic hardship from tournament cancelations would force anybody out of college athletics, but added, “I think that this is a black swan event that opens your eyes to the entire vulnerability of the NCAA structure as a whole. When you wake up and you realize that basically your entire mode of funding your athletic department is fully reliant on transfer payments from the NCAA. In a moment like this, you realize just how vulnerable all of that is to any kind of disruption that you have no control over.”
Anthony Weaver also didn’t think the current situation would lead to a widespread reclassification movement. “Changing your classification level, whether you go up or down, that’s a major, major decision that’ll have an impact on your institution for a generation. I know it’s done, but schools usually don’t decide ‘I’m going DI’ and then change their mind. So my guess would be is that schools probably wouldn’t make that type of decision unless they feel like over a 10- to 20-year period or longer, obviously, that this just isn’t gonna work.”
But, he added, that would also depend on what is happening to the university at large. If economic forces weaken the rest of the university, there’s no question it could force athletic changes as well.
“You hear all the time about how college athletics are the front porch for a school,” Weaver said. “Well, if you’re using athletics to tell your story, and you go back to this house analogy and it has a really nice front porch, but the rest of your houses is just damaged and the foundation is awful, and there’s nothing there. It doesn’t matter how nice the front porch is.
“Nobody is buying that house. College athletics can get students to look at the school, but it’s really other institutional benefits that get students to commit.”