“I’m going to say this, and I’m probably going to get in trouble because I work for Turner. … I think Turner Sports and CBS got to close down March Madness,” Charles Barkley said Thursday morning on ESPN. “Even if there’s no fans in the stadium, you can’t have these players breathing on each other for two weeks. Even if they had a hotel, they’re going to be in different cities around the country. … It’s going to take tremendous courage because a lot of people make a lot of money on March Madness.”
Within hours, Barkley’s prediction had come true: The NCAA announced it was canceling the tournament, along with the women’s tournament and its spring sports championships. And as the reality of a March without Selection Sunday, bracket pools and buzzer-beaters set in Friday, television networks, major advertisers, college sports officials and other stakeholders began to grapple with the financial ramifications of eliminating an event that annually generates more than $1 billion, which flows through the NCAA to conferences and schools, as well as hundreds of millions spent across the country by fans attending games.
Officials at conferences and schools who count on millions flowing in from the NCAA are just beginning to discuss the potential impact on their budgets. In statements this week, they have avoided the question of whether the tournament’s cancellation will cut into the more than $600 million the NCAA distributes each year.
The NCAA is “working through the considerable implications” of canceling its championships, an NCAA spokeswoman told The Washington Post in an email. “While some decisions can be made quickly like the suspension of recruiting activity, others may take time to reach a conclusion.”
The NCAA and its broadcast partners, CBS and Turner Sports, are in the middle of a 14-year, $11 billion deal to broadcast the men’s tournament through 2024. In 2016, the parties extended the contract through 2032 for $8.8 billion. Those deals essentially fund the NCAA’s existence.
In an interview this month with Bloomberg, NCAA chief operating officer Donald Remy said the organization had a business-interruption insurance policy that it believes would partially cover losses, as well as some money in reserve.
“If you can think of it, it’s something that we’ve gone through an analysis around,” Remy told Bloomberg. “We’ve contingency planned for all circumstances.”
For the five wealthiest conferences and their member schools — those in the ACC, Big Ten, Big 12, Pac-12 and SEC — the strength of football television contracts and the lucrative College Football Playoff will help mitigate the financial pain of lost basketball revenue.
But smaller conferences are more dependent on basketball to fund their annual operations. In the Atlantic 10, in which NCAA money funds more than 60 percent of its $26 million in annual expenses, commissioner Bernadette McGlade said she and her colleagues were awaiting word from the NCAA about how this year’s payouts would be affected.
“We’re a basketball-centric league. We have no money coming in from the CFP,” she said. “My intellect tells me [NCAA support is] going to be disrupted. To what degree, we’re not sure.”
Hundreds of millions of NCAA dollars fund scholarships, grants and other operations at 1,200 member schools across the country. Those payouts are in six- and seven-figure increments that many colleges and universities probably can absorb with significant operational changes. But the cancellations of all spring sports will have broader ripple effects, Patriot League Commissioner Jennifer Heppel said Friday.
Some seniors in canceled spring sports probably will come back for the extra year of eligibility the NCAA granted them Friday. Schools, in turn, will have to petition the NCAA for extra scholarships so they can bring back those seniors while honoring offers to incoming freshmen. That could lead to budget crunches at smaller schools, not to mention competitive bottlenecking if freshmen suddenly have fifth-year seniors battling for the same, finite number of spots.
“Those are the things we’re just starting to talk about and not at all wanting to be in restrictive mode with our student-athletes, because of these unique circumstances,” Heppel said. “There’s no precedent here.”
A network nightmare
At the television networks that broadcast the games, officials declined to discuss the financial ramifications, including whether they would still make planned payments to the NCAA this year or whether they have insurance policies to protect against this outcome.
“We are fully supportive of the NCAA’s decision to cancel this year’s NCAA Division I Men’s Basketball Championship," CBS and Turner said in a joint statement. "We’ll continue to work closely with the NCAA and all our partners as we prioritize the health and well-being of everyone involved.”
Most networks have clauses in their largest broadcast contracts that protect against unforeseen and unpreventable disasters that cancel events. Whether it’s a natural disaster or a terrorist attack, the clauses are designed to protect the networks from having to pay contractually obligated rights fees in the event of what is known as “force majeure.” Whether the coronavirus threat would qualify remains unclear.
Some networks also have insurance policies for major broadcast events. Brian Roberts, chairman and CEO of Comcast, which owns NBC, recently said his network has insurance that would cover losses if the Olympics are canceled.
CBS and Turner could face significant losses in advertising income. According to analyst firm Kantar Media, advertisers spent $910 million during last year’s men’s tournament. Networks will have to reimburse some advertisers or make it up to them when other sports return to the airwaves.
Despite the circumstances, industry analysts predicted there was too much at stake, given the amount of money and the length of the contract involving CBS, Turner and the NCAA, for them and their corporate partners not to find solutions. Those might include adding an extra year to the end of the current TV rights contract or a settlement that guarantees TNT and CBS the chance to negotiate a new deal before the NCAA goes on the open market. Another option would be to add new content to the current deal to make it more valuable, which could require expanding the tournament.
“When you have a deal worth billions of dollars over so many years, with content that is so critically important to your business, I would be very shocked to see a major sports league or major broadcaster invoke a disaster clause and go to court,” said Dan Cohen, who oversees media-rights consulting for sports marketing company Octagon. “The relationships are too big to fail.”
In Atlanta, no contingency
The financial pain may be felt most acutely and most quickly in Atlanta, where hotels and restaurants were expecting more than 100,000 visitors for the Final Four. The NCAA alone had a block of 32,000 rooms reserved, and a Georgia State University economist estimated the Final Four’s financial impact on the region at more than $100 million.
While economists often dispute such estimates as overly rosy, William Pate, president and CEO of the Atlanta Convention and Visitors Bureau, said restaurants and hotels will undoubtedly feel significant financial pain in the months ahead. Coronavirus concerns are expected to reduce the region’s tourism and hospitality income 30 to 50 percent.
“We certainly respect the decision of the NCAA; the health and safety of their athletes and personnel is paramount," Pate said. "But it is certainly going to have a major impact at restaurants and hotels who often work on very tight margins.”
More than 300,000 people in the Atlanta region work in hospitality industries dependent on a steady flow of visitors staying in hotel rooms and dining in local restaurants, Pate added.
“We’re going to do everything we can to keep those people working," he said. “But there’s going to be belt-tightening.”