Basketball tournament expansion could pay off for NCAA

The NCAA is contemplating expanding its annual men’s basketball tournament from the current three-week, 65-team format
to one featuring an added week and a whopping 96 teams.

Proponents of the plan say it will generate a bigger
television rights-fee deal for the not-for-profit NCAA, which disperses 95 percent of that to member institutions.

The NCAA, based in Indianapolis, also is studying shifting some tournament games from network to cable TV, and broadcast
industry experts expect the bidding war to be intense if it’s opened up.

But opponents—including
some athletic directors—fear it could dilute the product and diminish the meaning of the regular-season and conference
tournaments.

Thoughts of expanding the tournament are heating up as a unilateral opt-out clause for the NCAA
with its current TV partner, CBS, approaches. The NCAA signed an 11-year, $6 billion deal with CBS to air the tournament in
1999. The deal runs from 2003 through 2013, but the NCAA can end it after the 2010 tournament.

Broadcast industry
executives said they’ve already been contacted by NCAA officials to gauge their interest in bidding for an expanded
tournament. The format change could be made as soon as 2011.

NCAA Senior Vice President Greg Shaheen is leading the study of NCAA basketball tourney.

“We’re entering a window where it makes sense to evaluate all of our assets, all of our
events,” said Greg Shaheen, NCAA senior vice president of basketball and business strategies. “This
is a significant due diligence exercise.”

Shaheen is heading up the group studying the potential expansion.
He is being assisted by a pair of well-known media consultants, former CBS and Turner executive Kevin O’Malley and Chuck
Gerber, former ESPN executive vice president for collegiate sports programming.

“My job is to facilitate
the discussion,” Shaheen said. “I don’t have a position at this time.”

The expansion
being contemplated is characterized by some in college basketball circles as folding the 32-team National Invitation Tournament
into the 65-team NCAA. The NCAA bought the rights to the NIT Tournament in August 2005.

Shaheen acknowledged
the NIT could be part of the ongoing analysis.

While Shaheen said there’s no deadline to change the tournament’s
format or even complete this study on tournament expansion and the NCAA’s TV deal options, this much is clear: The men’s
basketball tournament is by far the biggest moneymaker for the NCAA and its members.

The
men’s tournament—called March Madness—accounts for more than 90 percent of the NCAA’s revenue and
is responsible for funding many other NCAA sports tournaments, events and initiatives.

Shaheen said that, while
NCAA officials haven’t decided yet which way they should go with the men’s basketball property, expanding the
tournament has some undeniable advantages.

“Many of the advocates talk about how the membership has grown
significantly over the years and how an expansion could accommodate more schools,” Shaheen said.

He noted
that there were 280 Division I NCAA schools in 1985, when the tournament expanded from 53 teams to 64. Now, there are 343
member schools.

“To an extent, it’s a matter of supply and demand,” Shaheen said.

Not everyone is pro expansion.

Purdue University Athletic Director Morgan Burke said he’s just learning
about the idea of tournament expansion and doesn’t like it.

“If you expand to 96 teams, why not 128?”
Burke said. “Why not let everybody in? The idea is to play your way in, to qualify for this tournament. That’s
a big part of what makes it special.”

Burke added that extending the three-week tournament to four weeks
would produce scheduling headaches for colleges and their student-athletes.

“If you push the tournament
back one week, that affects the conference tournaments, and if you push the Final Four deeper into April, I don’t think
that’s good for the student players,” Burke said. “I’ll be open-minded to proposed changes, but I
simply don’t think the model we have now is broken.”

Broadcast business experts said while the model
may not be broken, it’s time the NCAA find a way to get more production from its cash cow.

“This
deal was made at a time when an 11-year, $6 billion deal was huge,” said Matt Morchower, founder of Varsity Sports,
a New York-based production company and broadcast consultancy. “Compared to more recently negotiated rights-fee deals,
it’s not so grand anymore.”

When the NCAA’s deal with CBS was signed a decade ago, the average
annual value of the deal—$545 million—was surpassed only by the NFL’s annual rights-fee deal of $2.2 billion
and the NBA’s $650 million.

The NFL is now making $3.7 billion annually, the NBA is netting $930 million,
and NASCAR is hauling in $560 million.

“The financial upside is one element we’re considering,”
Shaheen said. “We simply want to assess ourselves and our marketplace to make an informed decision for ourselves and
our membership.”

Broadcast business experts said behind-the-scenes discussions between the NCAA and prospective
broadcasters have already begun. Shaheen remained tight-lipped about those discussions, emphasizing that the NCAA has a current
contract with CBS and the NCAA’s focus is on that relationship right now.

ESPN officials recently told
IBJ they’d be interested in bidding on tournament games. Disney, which owns ABC and ESPN, could make a play
to run the tournament on a combination of network and cable.

ESPN has already shown it will aggressively bid
for college athletic events, recently agreeing to pay $125 million a year for five BCS college football bowl games, a 50-percent
premium over what Fox is paying through 2010.

“Signing a deal with a broadcast partner that can bring this
weeks-long event to high-quality cable and broadcast distribution channels is the way I think the NCAA will go,” said
Robert Unmacht, principal of IN3 Partners Inc., a Nashville, Tenn.-based media and investment banking consultancy. “The
ABC-ESPN duo makes the most sense, but there are several other powerful players aligning to take a shot at this.”

Comcast’s recent acquisition of NBC means that network will likely make a push for the NCAA men’s hoops
tournament.

“Comcast now owns NBC, NBC Universal Sports and Versus, which they are intent on making the
next ESPN,” Unmacht said. “My understanding is, if the NCAA opens up bidding on this, they are immensely interested.”

Fox, with its national broadcast affiliates, as well as Fox Sports Network and FX cable channels, would also be
a likely bidder for the tournament, Unmacht said. CBS, which has aired the tournament since 1982, isn’t likely to give
it up easily.

The NCAA tournament has enjoyed sustained strong ratings, reaching 150 million U.S. households
last year, according to New York-based Nielsen Media Research, and that should make bidding for the tournament “a real
dog fight,” Unmacht said.

“There’s still an immense appetite for sports programming in this
country, and the NCAA basketball tournament, with its amateur status and Cinderella stories, is a special property,”
Unmacht said. “There’s no reason to think they couldn’t enjoy the same kind of percentage increases other
major sports properties have, especially if they expand the event without diluting their brand.”

Since
the NCAA signed its deal with CBS in 1999, the NBA has increased its TV rights-fee deal 43 percent and the NFL 61 percent.
A 50-percent increase for the NCAA means it could command $817 million annually for its men’s basketball tournament.

A tournament expansion—which would mean more games and more TV programming—would likely boost the rights
fee even higher, sports business experts said.

“If expanding the tournament by one week will bring them
$800 [million] or $900 million a year,” Unmacht said, “I’m not sure how they could do otherwise.”•

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