March Madness' Success Is a Big Gamble

Even in a recession, bracket pools around the U.S. are likely to total more than $3 billion this year for the NCAA tournament

By Rick Horrow and Karla Swatek

1. March Madness: A $3 Billion Gamble.

Three billion dollars.

That's not the cost of Jerry Jones' next sports real estate venture, nor is it the amount of bailout money some shady bank will receive. According to R.J. Bell of sports betting site Pregame.com, more than $3 billion will be plunked down for March Madness bracket pools in offices across the country—just a little less than the 2008 state budget of Delaware.

According to 2008 polling data, more than half of all Americans 16 and older have placed at least one legal or illegal bet on sports in the past year—including office pools. Recent estimates peg the annual amount of all sports betting in the U.S. at $300 billion—almost as much as the GDP of Switzerland. All but two states, Hawaii and Utah, allow some form of gambling, and Utah is considering Indian casinos.

A new Microsoft/MSN survey indicated that 45% of Americans plan to enter at least one college basketball pool in 2009. More women (50%) than men (42%) claim they'll participate in at least one pool. However, 15% of MSN respondents say they'll spend less money entering pools than they did last year, while 10% more are planning on sitting it out.

What does this all have to do with the business of the NCAA tournament? A lot. Not wanting to be left out of this major revenue stream, almost every major sports media entity is holding its own online bracket challenge—and if they can't get a direct piece of the action, there's advertising. Fox Sports is holding the $1 million Hooters Bracket Challenge, while ESPN has its Tournament Challenge presented by State Farm and Sprint. Yahoo! Sports counters with its $1 million Tourney Pick'em '09, presented by KFC Value Meal in a nod to the tough times.

Allowing employees to participate in pools could be good for company morale—a salve to the withering economy, employment experts say. But is that reason enough to look away when they're watching from their desks?

2. How Many Hineys in House?

Conference by conference, NCAA officials saw attendance fall during the just-completed men's basketball regular season. From the ACC to the Big East, all the way to the Mountain West, most leagues saw per-game averages dip 1% to 5%, according to individual conference data.

Even the venerable Big East tournament at Madison Square Garden in New York City—which delivered no less than three No. 1 seeds to the Big Dance—saw fully 50% less value in tickets sold, according to TicketsofAmerica.com President Michael Lipman.

For the moment, however, the NCAA tourney is looking to provide welcome economic respite to its host cities. In the Dayton region, for example, officials predict the NCAA Tournament will bring more than $6 million in economic benefits, as 10 top teams and their followers travel there this week. More than 13,000 people are expected for each game at the University of Dayton Arena, according to organizers there. The university itself is expected to take in $600,000 to $650,000 for hosting the games.

In Portland, Ore., the eight schools that drew seeds there have a ticket allotment of 6,800 Rose Garden tickets to first- and second-round games. Drew Mahalic of the Oregon Sports Authority is estimating a $10 million economic impact there, even if not all the tickets sell.

NCAA Tournament Associate Director David Warlock claims the main criteria when selecting host communities are the arenas, the number of available hotel rooms, and the airport and transportation infrastructure. The competition for bids for first- and second-round games is heaviest in the South and Midwest, Warlock adds.

3. March Mad Men: The Advertising Scene

Is CBS' $6 billion, 11-year rights deal with the NCAA for basketball properties including the centerpiece tourney paying off? To most, it looks like the deal, which goes through 2013, has been a better gamble for the network than betting on No. 1 seeds—even though the rights fee for this year alone tops $571 million.

The clincher in the profitability picture, of course, is the digital media rights portion of the deal.