Basketball: NCAA's Bottom Line Winners

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NCAA's bottom line winners
Schools in NCAA tourney have 51% profit margin from basketball. Most profitable: Louisville.
March 18, 2004:
By Chris Isidore, CNN/Money senior writer

NEW YORK (CNN/Money) - The big winner of this year's NCAA men's basketball tournament will be the University of Louisville.

Forget the seedings, the scores, the wins and losses. In the measure that matters most -- to this Web site, anyway -- Louisville is already champion. It has the most profitable basketball program of all the teams in the tournament.

Louisville had revenue of $14.6 million, according to figures compiled by the Department of Education for the 2002-03 school year. That was more than $10 million better than the average of the other 64 schools invited to the Dance. The University of Arizona was No. 2, with revenue of $14.2 million.

In terms of profitability, Louisville outdistances the field by even more -- $11.2 million went to the bottom line. Again, Arizona was second, with a profit of $9.9 million. Income at both schools dwarfed the $2.3 million the average participating program earned.

Universities get relatively little direct money from going to the tournament, despite a television rights deal under which CBS pays about $565 million a year to the NCAA. That money is distributed to the various conferences whose teams compete in the tournament, not to the schools themselves.

But thanks to income from regular-season games and various other tournaments that schools compete in, about three-quarters of Division I basketball programs are solidly in the black.

Enviable profit margins
All told, the 65 schools in this year's tournaments saw revenue exceed expenses by a total of $146 million last year, even though 13 schools reported losses and another four broke even.

The profit calculation considers only operating expenses, such as coaches' salaries, scholarship expenses and recruiting costs, not fixed capital expenses such as arena operations.

Louisville's profit margin is impressive -- about 77 percent of its revenue -- especially considering its well compensated coach, Rick Pitino, is one of the game's stars. But there are a dozen schools in the tournament where the profits equal 66 percent of revenue or better.

In fact, Louisville doesn't even have the fattest profit margin in the business. That title goes to the University of Illinois at Chicago.

The school is no athletic powerhouse -- it's seeded 13th in its tournament bracket -- but boasts an 87 percent profit margin. Nevertheless, don't expect the sports factories to emulate its model anytime soon.

Illinois-Chicago gets barely $1 million in revenue from basketball. But it spends less on its program than any other school in the tournament, just $127,198. That's less than what Duke coach Mike Krzyzewski earns every two weeks from his salary and endorsement contracts.

The school that spent the most on its program last year was the one that went home with the championship -- Syracuse University, which spent $8.4 million. That left it with a $4.4 million profit, and a 34 percent percent profit margin. Most pro teams would kill to be that profitable, but the Orangemen were well below the average 51 percent margin of their university peers.

The smallest revenue team was the first to exit this year's tournament. Lehigh University, which lost the "play-in" game to Florida A&M on Tuesday night, had revenue of only $128,211 last year.

Of the schools that start play Thursday, Central Florida had the lowest revenue with $161,157 last year, while Western Michigan had the largest loss, $690,257.

Central Florida Athletic Director Steve Orsini said that the school will lose money again this year, but he hopes that its recent on-court success, coupled with plans for a new arena with more than double the capacity and a move to a new conference, will help it turn a profit on basketball in the future.

"We did have an increase in ticket sales and exceeded projections. We haven't run the numbers, but I would hope this year's numbers are a big improvement on last year," he said. "We've made an investment in the program, increased expenses, gave coaches raises. It didn't show in last year's numbers, but it's hopefully beginning to pay off."

Given the profits being pulled down by the more successful programs, that seems to be one of the safer investments you can make in sports.