March Madness generates crazy money
Gamblers are expected to bet a whopping $9 billion on this year's NCAA's Men's Basketball Tournament.
To put that in context, that's more betting than on any other sports event besides the Super Bowl. That's also more than the $6 billion that Americans spent on celebrating the Fourth of July. It underscores how of a big business this amateur competition has become. No wonder it's called March Madness.
The NCAA also collects $770 million annually in broadcast fees from CBS (CBS), the parent of CBSNews.com, and Time Warner (TWX) under a 2006 deal. The tournament selections will be announced Sunday on CBS.
Most of the madness comes as millions of fans join in the fun through office pools, which many companies tolerate despite how distracted workers can become. Such is the excitement of picking the men's college basketball champions that one estimate forecasts it will cause a $4 billion drop in workplace productivity during the first week alone.
Concerning a different money angle, as Baruch College sports law expert Marc Edelman noted, the price that student athletes pay to participate in this event is also high because they get no monetary compensation. Some are on the road for nearly a month on the way to the "Big Dance" and miss many classes as a result.
"We call them student athletes," said Edelman, who favors a free-market approach to determining athlete pay, noting in an interview that they "aren't traditional students but a labor force."
And despite booming popularity of collegiate sports, many colleges lose money on them, even when teams win. As of 2013, only 3 percent of college basketball programs generated a surplus. Overall, they had a median loss of $811,000. An NCAA spokesperson couldn't immediately be reached for comment.
According to Challenger, Gray estimates, as many as 50.5 million Americans could participate in office pools this year, accounting for about 20 percent of all employed workers. That's up from 11 percent in 2014 and reflects the growing numbers of people who are streaming games on their mobile devices. Corporate info-tech bares the brunt of the increased network traffic.
"If your employees are watching streaming video at their desk -- such as their favorite team's first-round matchup -- they are going to be eating up a sizable portion of your bandwidth, Matt Gilley, an attorney in FordHarrison's Spartanburg, South Carolina, and Asheville, North Carolina, offices told the Society of Human Relations Management (SHRM) blog.
Some CEOs like to join in the fun, perhaps none more than Berkshire Hathaway (BRK.A) CEO Warren Buffett, who's offering employees of his conglomerate the chance to win $1 million a year for life in what he calls "the ultimate office bracket contest."
The billionaire octogenarian, considered to be history's greatest investor, is a huge college basketball fan, and he's also offering $100,000 for the person who picks the greatest number of consecutive games correctly. To collect the big prize, however, will require the person to make it to the Sweet 16 -- a daunting task, to say the least.
According to Duke mathematician Jonathan Mattingly, the odds of picking all 32 games perfectly are 1 in 2.4 trillion.