Nicholas Roberts
Mrs. Straub
AP Econ
March Madness
With March Madness just around the corner, many fans are anxiously anticipating its start. It’s a time of the year where basketball fans far and wide, of all colleges, come together and cheer for their team with hopes of watching their team raise the NCAA Championship. Some believe that March Madness has a negative economic impact, but I challenge that claim and say that it actually has a positive and much needed impact on the economy as a whole. It is true that with all the hype that comes with March Madness will come with possibilities a loss in productivity. According to an article written by Danny Vinik, “about one-third of the workforce said they will watch basketball in their workplace.” This loss in productivity will bring an estimated economic loss of 1.2 billion dollars. Because of this loss in productivity, the supply curve will drastically shift to the left reducing the output produced by each company. However, March Madness also induces incredibly positive economic gains that heavily outweigh these economic losses. First, March Madness provides certain types of companies with enormous economic upside. These companies, “hotels and restaurants in the 14 cities that host games will gain the most, thanks to traveling fans cheering on their teams” (Vinik). These companies will reap the benefits of an increase in demand for the goods or services. Increased demand ultimately allows these companies to increase their prices and the consumers are forced to pay whatever the price due to its high inelasticity. Additionally, there are many fans, of every college, that will spend thousands of dollars to see their teams play in the tournament, especially of their team makes it far into the tournament. Ticket prices skyrocket during the tournament due to the increased demand to see each of the games. Ticket prices range from about $100 for each nosebleed seats to upwards of $10000 for each courtside seat. These boosted ticket prices allow for stadiums to be renovated, creating a better environment for its consumers, thus creating more future revenue. Also a major benefactor from March Madness are casinos and other betting establishments. It is estimated that “$9 billion dollars will be wagered on March Madness” (Tuttle). The estimated total is projected to be well over the amount bet on the Super Bowl, providing casinos with an enormous economic boost for their revenue. The NCAA is arguably benefits the most as March Madness is its most profitable time of the year. Its average revenue during this 3 week stretch is 900 million dollars. The main contributor to this insane 3 week profit is the 14 year 10.8 billion dollar deal that CBS signed to air the tournament’s Final Four. That is about 771 million dollars a year. The commercials during March Madness bring in a huge portion of revenue for CBS. Commercials that air during the championship game goes for about “1.5 million dollars for a 30 second ad… The overall amount spent on advertising is expected to be 1.13 billion dollars” (Berr). That is an expected profit of around 350 million dollars. Not to mention the financial benefits distributed to colleges for making it to the NCAA tournament. “They can net $1.67 million just for appearing in tournament regardless of whether they win. They earn about $5 million making it to the round of 16 and $8.3 million if they reach the Final Four” (Berr). That is a ton of money that can help grow the university athletically as well as academically. Overall, March Madness does provide some opportunities that will reduce productivity and cause some companies to lose money, but provides enormous upside that translate to massive economic gains.
Works Cited
Berr, Jonathan. "March Madness: Follow the Money." Money Watch. CBS News, 20 Mar. 2015.
Web. 13 Mar. 2016.
Tuttle, Brad. "The Staggering Numbers-and Dollars-Behind March Madness." Everyday Money.
Time Inc., 20 Mar. 2015. Web. 13 Mar. 2016.
Vinik, Danny. "The Economics of March Madness: The Tourney May Not Hurt the Economy as
Much as You Think." New Republic, 16 Mar. 2014. Web. 13 Mar. 2016.
From an employer/ producer prospective, there is no doubt that March Madness is a negative externality. The report that credits March Madness with a loss of productivity estimated at over $1 billion supporting this thought. I agree however, that there are positive economic impacts from the tournament and that they out weigh the negative ones. It would have been interesting to see what the economic impact of the tournament to the local economies of the cities which hosts the games is.
ReplyDeleteGreat article. I would be curious to see where the money that the schools receive go to. Does it get distributed throughout the school or does it stay strictly in athletics. I can imagine the cities hosting the games get a huge financial boost. They probably make more in 3 weeks than the rest of the year combined.
ReplyDeleteI agree that March Madness reduces productivity. A few years ago this was not as much of a problem but now with the option to live stream the games online and on your phone, it can really be distracting. The cities that host tournament games obviously experience economic gains but it would've been interesting to look at this more in depth. For example, would Milwaukee hosting the final four have as much of an economic impact as Chicago?
ReplyDeleteLol. March Madness does nothing but absolutely destroy productivity both in school's and in the workplace. Personally, in the past few years as soon as the tournament bracket's come out I take a month break from school to focus solely on college basketball. I can see from experience how much companies could lose in lost productivity, but there is definitely the other side of the story in which cities around the country who host sets of games, especially the final four see a drastic increase in the economy. I thought your writing was fairly poor as usual, but since I expected nothing better good job I guess.
ReplyDeleteThis is an interesting take on the upcoming March Madness tournament. One aspect that wasn't discussed was the lost production in schools. While this doesn't have a great effect on the economy, it still can be a nuisance. Would it be too much of a stretch to claim March Madness decreases the overall intelligence of our country's intelligence? Of course. Still, the effects of March Madness are seen in more than just the workplace. Overall, nice job comparing the positives and negatives that result from this great tournament.
ReplyDeleteYou're definitely right Nick that March Madness decreases productivity in the workplace. This is also the case in school, as some students may try to keep up with the games in school. Although this would not result in any negative economic effects, that student and potentially other students may suffer from this negative externality.
ReplyDeleteThe tournament also helps bring a lot of publicity to the schools that attend the tournament. The amount of student attendance at the school increases by just having their names within the 64 teams. If they advance, their school’s popularity will increase all the more. Of course, the winning school becomes a very highly recognized school and attendance soars through the roof.
ReplyDeleteI agree that although March Madness decreases productivity, it may also increase moods which can lead to some positives as well. People probably go out to restaurants more in their own hometowns which stimulates small businesses all over the country. Also clothing stores probably sell lots more sports apparel. Therefore I'd also say that not only the cities that host games or have teams themselves benefit, it could also be smaller cities.
ReplyDeleteI like the topic since it is so controversial. The benefits outweigh the costs in this situation as you pointed out. Also the money that is gained by teams that make it to the tounament is a huge deal. Most I am sure are unaware of that. That money can make a big difference for smaller schools like UW-Green Bay, and it can help them improve their school academically and athletically as you mentioned. It will also help the school bring in more students as now they will recieve national attention.
ReplyDeleteI like how you were able to recognize the astonishing amounts of money that comes in to the NCAA. One of the most controversial issues is whether the players should be paid for the amount of profits and money that comes into this massive tournament. These players are playing on even a bigger stage than some of the professional sports players. Lastly it gives the schools so much attention and can really help grow their school and their athletic programs.
ReplyDelete