Bowl Math for Dummies (& College Presidents)

I like to think of myself as a fairly agreeable, friendly person.  However, there are a few things that I hate to my core.  They include sanctimony, intolerance and the college Bowl system.

I’m only a sports guy to the extent that I’m a fan. So all you MSAs can show off your big brains and poke holes in my logic.  But as a fan, I HAAAAAAATE the college Bowl system.  It’s fascist and unAmerican on every level.  Since only one game counts for anything, I only really watch one game. I might stumble upon the Fiesta Bowl for 30 minutes to watch Texas beat the snot out of OSU, but I’m certainly not going to plan my day around it. And every 38th year when OU gets a bid, I’ll watch a 2nd bowl game. (Yay 2044!) But I have a hard time even getting very excited about that. Our season’s over whether we win or lose.

By contrast, I try to watch every second of every game that I can during March Madness. It doesn’t matter who’s playing.  Yesterday (12.18.08), I asked that a meeting not be scheduled for 03.19.09 because I know that the tournament starts at noon that day.  Now, I’m willing to acknowledge that I may be at the end of the bell curve re: my devotion to the tournament and this might be a good time to note that my office is located in the former state mental asylum on The Ridges, but I am absolutely convinced that there are millions of people like me who’d watch a heck of a lot more college football in December and January if it was part of a tournament.  More viewers = more money.

Others can argue the entrenched interests of the BCS and the distribution of proceeds to the power conferences as reasons there will never be a tournament.  I’m not going to challenge that.  That’s a money coming out the bottom of the funnel argument.  I’m arguing the money going in the top of the funnel.  The total economic activity around post-season college football would be much greater in a tournament than it is in the current arrangement.

I’m also not going to argue for the complete dissolution of the bowls.  You love the San Diego County Credit Union Poinsettia Bowl?  Fine!  Keep it.  Make it an early round game in the tournament.

I’m a finance guy.  I think justice, decency and patriotism demands that we do the thing that generates the most money.  And looking at the performance of the early rounds of March Madness compared to the non-BCS bowls, I believe our esteemed college presidents are leaving several hundred million dollars per year on the table.

In 1999, CBS paid $6 billion for the rights to the NCAA Men’s Basketball Tournament for 11 years.  Let’s assume CBS is paying a flat $545 million per year for these rights.  They pay this every year for a tournament that features about 38 hours of prime time programming and draws about 8.4 million viewers for early-round games and 20.5 million for the final.  Last year, CBS drew 132 million television viewers and 4.8 million online viewers from whom they earned $543 million and $23 million respectively in ad dollars, equating to $4.12 and $4.83 per person. That’s $21 million profit for CBS and a fairly paltry 3.8% return.

By comparison, there were 27 non-BCS bowl games last year.  Using a 1.7 viewer-to-rating point conversion factor, I estimate that they drew 145 million viewers or 5.3 million per game – almost 37% less than the early rounds of the NCAA Men’s Basketball Tournament.  Given that college football is indisputably more popular than college basketball, only drawing even with the early-round ratings of the basketball tournament seems very conservative. Need evidence of that? Last year’s football national championship game drew nearly 34 million viewers – almost 66% more than its basketball counterpart.

So here’s my proposal and my estimate of the viewership it would draw and the revenue it would generate from broadcast rights.  A 24-team playoff played over 5 weeks in which the top 8 seeds get first round byes.  That’s 23 bowl games to determine a national champion.*  I would expect that the first 3 rounds of the tournament (20 games to get to a Final 4) would draw at least 33% more than the early rounds of the basketball tournament.  That’s 11.1 million viewers per game; 223 million over 3 weeks.  I’d expect the national semifinals to draw as many viewers as the basketball championship.  And I’d expect the championship game to draw about the same number that it currently does. That’s more than 300 million viewers, nearly 80 viewers more than watched the 5 BCS games and top 18 non-BCS games in 2007 combined.  At $4.12 per person, that’s $322,151,740 that could have/should have been generated by CBS.  And since we know that CBS’s hurdle rate is apparently only 3.8% return, that’s about $310 million that NCAA member institutions left on the table.

If CBS was willing to pay $6 billion over 11 years for a tournament that draws 132 million viewers per year, what would they be willing to pay for a tournament that draws 300 million viewers or more?  $13 billion?  $14 billion?  Come on, College Presidents!  The American economy needs all the stimulus it can get.  You’d be doing your country a great service if you voted to institute a playoff in 2009.  This is change we can believe in!  Pleeeeeeeease, pleeeeeeeeeeeeeeeeeeease, give us a playoff and take another $310 million per year for yourselves.

*If you want to make room for the other 18 teams and 9 bowls games played in 2007, put a second pool of 16 teams in a football equivalent of the NIT playing 15 bowl games over 4 weeks.  They probably wouldn’t generate any more interest than those bottom tier bowl games do today, but it would preserve those games and those postseason opportunities for those schools, their student-athletes, and fans.