`Once-in-a-lifetime' Madness will go on because it has to
INDIANAPOLIS — Against a difficult financial backdrop, in the midst of a global pandemic, the NCAA is going to try something unprecedented.
The association announced Jan. 4 it would host the entire Division I men's basketball tournament in central Indiana, even as the state reported 3,630 new cases of coronavirus and an additional 39 deaths, and saw a steady rise in the positivity rate from Dec. 23 through the early part of January. Those numbers have begun trending better recently.
The NCAA is taking what it hopes will be a once-in-alifetime approach to the 2021 tournament after last year's tournament was shut down by COVID-19 before it could begin, costing the NCAA revenues approaching $1 billion.
Which is why, even given the unprecedented ch allen ges,t he wider public health situation and the fact that this has never been tried, there exists a firm belief the NCAA will, come hell or high water, find a way to make it happen.
No one can afford the alternative.
Working to ensure a safe tourney
Everyone involved in the NCAA's announcement earlier this month, from the governor to the mayor to NCAA President Mark Emmert, expressed supreme confidence not just in the feasibility of an all-Indy tournament but also the safety of one.
Some of that is based on coordination with the city and the state. And some of the NCAA's confidence is based in its own safety protocols, which have been in place for months as a roadmap for schools to safely return to competition.
Those recommendations touch on a variety of issues, from testing and tracing, to best quarantine practices, to understanding risks of transmission and more.
“The NCAA medical advisory panel, well back in the summer, has presented guidelines for our membership for the safe return to sport,” NCAA Senior Vice President of Basketball Dan Gavitt said.
Some procedures will be amended to fit the tournament. The NCAA will sequester individual teams on their hotel floors, and provide tight security, according to Gavitt, around meeting and practice spaces.
The NCAA is also expected to put teams through rigorous testing during intake. Gavitt said the environment would not be a true bubble, but would be “very controlled.”
There are also questions of wider public safety.
The NCAA hasn't decided whether spectators beyond a small number of team family members will be allowed into games. Gavitt said that decision could come next month.
“We have certainly had plentiful and fruitful discussions with (Marion County Public Health Department Director) Dr. Virginia Caine, in particular, and the Marion County Department of Public Health, and have gotten preapproval of some of those protocols, that we're still working our way through,” he said.
But fans won't be a deal breaker for the tournament to be played, as they aren't right now in the Big Ten, which allows only family members in arenas, spaced out for social distancing.
What matters most is playing the tournament, period. The NCAA can draw confidence (and lessons) from the variety of sports that have completed or are playing their seasons despite COVIDrelated challenges.
“We've learned so much,” Gavitt said, “from the success of others about how to go about doing this.”
March Madness drives NCAA
The show must go on because the NCAA tournament is one of the country's most recognizable and popular sporting events — and among its most lucrative. Annual revenues underwrite NCAA programs, fund disbursements to 1,200 member schools and, in effect, pay for the bulk of the association's functional existence.
The cancellation of the 2020 tournament — amid the chaotic shutdown of the country in March to try to curb COVID's spread — dealt the NCAA, its schools and its broadcast partners a painful financial blow. Deep cuts and furloughs were followed by a resolute determination to make sure the same thing did not happen in 2021.
It's well-known that the Division I men's basketball tournament is the financial lifeblood of the association. It generates the lion's share of the NCAA's annual revenue, which goes to everything from paying salaries, to member distributions, to staging championships and programs.
Everything the NCAA does or provides — f rom rules oversight, to eligibility certification, to grants, scholarships, empowerment programs, and more — is underwritten in large part by revenues from the men's basketball tournament.
In short, it is the engine that drives the association's mission.
According to financial statements, the NCAA reported total revenues in excess of $1.1 billion for the fiscal year ending Aug. 31, 2019. Of that, about $868 million were reported under television and marketing rights fees, plus nearly $178 million under revenues related to championships and NIT tournaments.
The bulk of that money, of course, comes from television and media rights deals, sponsorships and game-day revenues related to the men's basketball tournament. In effect, the tournament pays the bills.
It was widely reported in the spring the NCAA had business-loss insurance, which would cover at least some of the gaping deficit created by the cancellation of the 2020 tournament. But it was simultaneously suggested that insurance would not cover the entire loss.
The NCAA responded by significantly cutting the salaries of its top executives, and dramatically scaling back distributions to member schools. Later in the year, the association also furloughed rank-and-file employees.
A year later, the NCAA still has business-loss coverage, though it's not clear to what extent. The overarching reality remains: Losing another men's basketball tournament would be financially catastrophic.
Budget crunch hits hard
The NCAA's financial outlook is laid bare by the dramatic measures the association has been forced to take over the past year.
Emmert took an announced 20% pay cut earlier this year, along with every member of his senior management team. Vice presidents also took a 10% pay cut. Then, in early September, The Associated Press reported the association would furlough approximately 600 employees for three to eight weeks.
The trickle-down effects reverberated across college athletics.
The association announced in late March that its annual distribution to member schools, estimated at $600 million before the COVID-19 crisis, would be reduced to approximately $225 million, a direct effect of the NCAA tournament's cancellation in March.
Those distributions are not the biggest piece of the pie being taken out of department budgets right now, but they aren't insignificant either. For Power Five athletic departments, distributions can run annual revenues well into nine figures.
Big Ten athletic departments are facing revenue deficits running into the mid- and high-eight figures, with some departments fearing they could even push past $100 million. Even at Indiana — where football, the greatest driver of game-day revenues in the Power Five, is less financially robust than at peers such as Ohio State and Michigan — that deficit could reach $60 million for the current fiscal year.
NCAA distributions are determined by a variety of factors, including athletic and academic performance. Part of the formula is tied directly to performance in the basketball tournament, based on a rolling six-year average. Some is also distributed via the conferences.
Other sources of income, such as ticket sales, have accounted for bigger losses in the past year. But against the current financial backdrop — with sponsorship revenues down, game day revenues virtually nonexistent and boosters likely more difficult to engage — a reduction or total loss of NCAA distributions for yet another year could be incredibly damaging.
“The reality is, it definitely would have a major impact on us,” Indiana Athletics Director Scott Dolson said. “It might not seem as significant, but given where we are with the pandemic and the loss of ticket revenue, it would be significant. It's important.”
At a time when even some of the country's wealthiest athletic departments are enacting dramatic cost-cutting measures, and even discontinuing varsity sports, every dollar counts.
That impact is felt even more sharply down the college athletics pyramid.
Distributions tend to decrease as they filter down, but their impact on departments remains profound, as overall budgets decrease as well.
For example, in the fiscal year 2019, Indiana State reported athletics revenues at a fraction of IU's, just $17.4 million. NCAA distributions were also lower, $653,823.
Yet, taken as a percentage of total revenue, the impact is virtually the same. In fact, in both budgets, NCAA distributions accounted for about 3.7 percent of revenues.
And while the raw numbers may be larger for Big Ten and SEC institutions in terms of revenues lost, the safety net weakens further down as well.