Kate Burbach
Mr. Reuter
Economics 4B
14 March 2015
March Madness: Economic Effect
At the start of March most people sit down and create March Madness brackets that predict how the whole tournament is going to pan out. People will make bets on who will have the perfect bracket; the goal is to have the highest number of correct predictions out of the group. The YouTube video, The Economic Bonanza, states that “a prize of $1 billion went to anyone that predicted every game right last year” (The Economic Bonanza). March Madness is a fun season filled with competition, travel, new apparel, and lots of basketball, but the real benefit is the revenue from travel, ticket, and apparel sales that help the school and our economy.
One news reporter looked back on the University of Connecticut's success in the 1995 tournament when the women's team took home to the trophy. Not only did the championship boost UConn's pride, but the number of applicants increased, supporters of the team increased and the school received more funding. NBC News reported that when the women from the 1995 basketball team went to visit the state legislature, lawmakers voted to give one billion dollars to the UConn campus-improvement project, which then lead to another 1.3 billion dollars added on to the original billion (Run Can Mean Billions For a School). Without the championship title the state legislator would have not put so much money into the athletic program; however after looking at the marginal cost the team's outlook is promising so adding money seemed to bring more benefits than harm. Also, NBC news claims corporate sponsorships, licensing deals, and ticketing sales for the sports teams went up, as well as the overall application numbers due the media exposure (Run Can Mean Billions For a School). With more capital the university will be able to offer students better amenities and graduates will be seen as more marketable because the school is well known. The profits from the Final Four flourish were studied and the overall revenue increased from $528.7 million to $634.1 million. According to IMG College, there was a $100,000 leap in licensing revenue from the March Madness Final Four (Run Can Mean Billions For a School). It can be concluded that in the University of Connecticut benefited from the revenue and popularity from the March Madness tourney.
The popular money saving app, RetailMeNot, took a survey last year that concluded that nearly one-third of Americans will watch the games at work this year, out of those people one in five men said that they would go to a bar during lunch to watch the game, which would be a negative externality for the employer. The tournament is taken very seriously in a sports fanatic's world (Vinik). People that follow the tournament very closely are willing to pay “the big bucks” to travel with their favorite team and fit in with the rest of the fans through special tournament wear. Looking at college wear for myself I know that any licensed apparel is not cheap. People are also willing to pay the larger hotel prices to get a great hotel that is close to the sporting arena. Hotels and restaurants in or near the 14 cities games will be held in will benefit from the out of town fans that have no choice but to pay the high rates. The same survey from RetailMeNot found that 28 percent of fans will pay $100 of more if their team makes it to the sweet sixteen (Vinik). That number does not include ticket prices and transportation costs. For example, the tournament was held in Las Vegas towards the beginning of March. People want to have fun not only at the basketball games but they get to travel to a party city and have fun at the casinos and bars: a positive externality for local vendors. According to the FBI, the average amount of money that is wagered during the tournament is $2.5 billion: that’s more than the Super Bowl (Maese). A passionate sports fan will be willing to pay the exorbitant prices for hotels, transportation, and other amenities.
This year on vividseats.com, a ticket for March 20th’s game in Charlotte, NC will cost between $70 and $700 per seat. A ticket for the Men’s Final Four Championship on April 6th in Indianapolis will cost anywhere from $169 to $3,346, because of the scarcity effect, there are more people wanting the tickets than there are tickets (Tickets). As seen in the Time Warner Cable Arena pictured down below, the lower the cost of the ticket the farther away you are, and vice versa. The March Madness tournament brings in a lot of money to the university and the economy, yet is fun and exciting for sports fanatics.
Bibliography:
"The Economic Bonanza--March Madness." YouTube. Newsloop Sports, 29 Mar. 2014. Web. 14 Mar. 2015.
Maese, Rick. "Conference Tournaments Hit Jackpot in Las Vegas, Much to Chagrin of NCAA." Washington Post. The Washington Post. Web. 15 Mar. 2015.
"NCAA Tournament Run Can Mean Billions For a School." NBC News. 10 Mar. 2015. Web. 15 Mar. 2015.
"NCAA Tournament Tickets." Vivid Seats. Web. 15 Mar. 2015.
Vinik, Danny. "The Economics of March Madness: The Tourney May Not Hurt the Economy as Much as You Think." New Republic. The New Republic. Web. 15 Mar. 2015.
It is really interesting to think about all of the positive externalities that the tournament brings to schools and cities, along with the possibilities of a championship. I hadn't really even thought about before too how much a city could benefit from hosting a couple of the games, especially the final four and national championship. All of the businesses around the city, restaurants, hotels, and shops would all get a boost form the increased amount of revenue and tourism. The schools do seem to also greatly benefit too, when you mentioned that they apparel sales can skyrocket, applicants can increase, and funding can increase; it sure makes it seem like going deep into the tournament can have a real positive impact.
ReplyDeleteThe is a really good example of how the economy works because, they are many good and possibly negative effects to this sports bonanza. All of the action in this particular event draws many people from numerous to see the top schools complete in the one and only March Madness. It was great how you tied it in that people going places to eat was a negative externality. But the other good side is for the owner of the restaurant because of the tournament going on right know many are going places to eat. Then with more people going to restaurants it helps boost the economy and gain money from the high fame event. Also it was also good that you mentioned how much people were bargaining for a ticket. Overall, This was a great topic to choose, because of the many ways that it can relate to economics.
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ReplyDeleteI knew ticket prices for March Madness would be high, but I didn’t know that $3,000 could possibly be the ticket price! It’s also interesting to read about how making it a certain distance in the tournament can have that large of an affect on a school, and how UCONN gained around a billion dollars to be put towards renovations.
ReplyDeleteMarch Madness is a big deal for basketball fans, you were totally right is saying that this events brings in positive and negative externalities. The fact that people watch it at work, could in turn affect a companies production possibility curve. It could also affect the supply curve. Workers are not paying attention to their wok while watching basketball leading to a production of less goods.
ReplyDeleteIt’s interesting to think how big sporting events like March Madness, the Olympics, or the super bowl can spark the economy in the hosting city. I was shocked by the actual number in dollars that March Madness brings in and because of that it is a positive externality to the local venues. Anywhere from hotels, malls, and restaurants can be benefited by having a major sporting event in their city which is why they are so beneficial to their economy. I thought this blog post did a great job at portraying this topic.
ReplyDeleteAwesome topic choice for your blog post! I know right now, March madness is a big deal just in PHS, but I can only imagine what a big deal it is for those hosting cities. It is neat how something as small as this, is capable of bringing in so much revenue to not just the location, but to its surrounding cities, and many other cities as well. March madness benefits, not just the venue, but also the surrounding businesses as well. Nice job!
ReplyDeleteMarch Madness is a big deal for college basketball fans around the nation. You not only can support your hometown team, but also give support to other teams that you picked from your bracket. When a team gets to the final four, you said people are more willing to give that school money. Making it into the tournament is a big deal, but making it to the final four shines a great light on your school. More money to grow your university is then put in place simply for winning basketball games. Next we see a huge dedication linked to the tournment, where unfortanlty people could be missing work or school to watch a game. This is crazy in my mind, but these really can have a negative effect on employers. We also see a benefit though towards tourism and the local economies from people coming to the games.
ReplyDeleteAlthough March Madness seams to lower a lot of production done, it has a great impact on the amount of money that is brought in. This is always a surprising amount as it doesn't only help just the stadium it helps hotels and even food vendors around them.
ReplyDeleteThis is a very good topic that a lot of people know a lot about. One thing that I didn't know though was that it had so many positive externalizes with people traveling everywhere and spending countless amount of money to watch and be apart of their favorite teams. Even though it is a lot of money it would behoove us to go and travel to watch teams play in Las Vegas for example. This one month of basketball changed the economy for the better and worse. Better because of all the money is spent watching the games but worse because some people leave work to watch the games. Great job on this topic!
ReplyDeleteBasketball is more fun game and also march Madness is a big for basketball fans. This is really good example for economy. Most of American's loves basketball and they watch the game because they are many good and possibly negative effects to this sports bonanza. The ticket starting price is $70 to $ 700 this shows that people will sure buy ticket to watch the game they doesn't care about money. The ticket price change is different states.
ReplyDeleteYou were right in saying that during March Madness people in class and at work get distracted. However there are more good things that come out of this event. Last year alone March Madness made over a billion dollars. This event is clearly more of positive then a negative.
ReplyDeleteAny big sports event like March Madness creates a huge amount of revenue. This is easy to see when examining how cities throughout the world compete to host the Olympics. At every level of the market from tickets down to apparel, the profits gained from the sports industry are enormous.
ReplyDeleteI liked how you related your article to such a prominent current event. March Madness is popular for the basketball, but the results of it are just as great on the economy! I also liked how you explained the potential externalities that exist because of the tournament. I wonder if the economic benefits are as great with other sports such as football or baseball.
ReplyDeleteI like how you connected the tournament to college recruits, but I think the most significant factor of the article would be the huge prize for getting the games right. The odds of winning are so high that companies are willing to offer that prize to promote their company. The prize would only attract customers, but the chances of winning it are so non existent that the prize is near impossible to get.
ReplyDeleteGreat topic idea first off. March Madness is an opportunity for both the big dogs and under dogs to gain fans and school awareness which intern benefits those colleges. Other tournaments could maybe learn and take note from the success March Madness has on the economy. I'm sure the NCAA football bowl games are second to March Madness as far as its effect on the economy and the nations participation. It is hard to top the madness that the NCAA tournament brings in March though.
ReplyDeleteI liked reading about how accurate it really is between friend groups and people during march madness because everyone is arguing and saying who they think is going to win it all. I think it would have been cool to read about the team that you though was going to win and make it more personalized even if it was as a joke. It would have been funny to read your last sentence if you said something about your favorite team winning. I also like that you incorporated the economic aspect of the tournament that no one ever really thinks about.
ReplyDeleteI personally enjoy March Madness more than any other sport related topic. The intensity and all out competitiveness is really a beautiful thing. It's interesting to think about how much money someone could win for the perfect bracket, even though the odds of it are so slim. March Madness also brings consumers into places such as bars and Buffalo wild wings, working at a bar I saw an increase in the amount of customers and it was nearly triple what we normally have.
ReplyDeleteMarch Madness does generate however many millions of dollars each year for colleges and businesses, but what about the players? They're at the center of the whole thing, yet they don't make a cent for their work (if you consider playing a sport to be work). Even the coaches can make millions, so why aren't athletes given any compensation?
ReplyDeleteI enjoyed reading your blog post because it is definitely a hot topic right now and something everyone can relate to! It's now easier for me to realize how much of an impact March Madness really has on our economy. I, myself, never really watch basketball for fun but I always tune in to the tournament and fill out a bracket. I think the whole tournament and bracket system in general helps more people relate to the games and gives them a chance to compete with one another. It also really does help businesses. I was even at Buffalo Wild Wings last night for dinner and it was jam packed with people and had just about every game on the t.v.'s inside. Not only does the tournament help those specific universities and businesses in the area of the games, but it also helps businesses everywhere even here in Pewaukee. I really liked your topic again and I think you did a nice job!
ReplyDeleteThe fact that the NCAA produces money for not only colleges, but cities as well is a great benefit. The only tradeoff that I can see to march madness is time itself. Bars and restaurants must make a huge increase as march madness hits. They would probably raise prices on some of their food or drinks in order to take advantage of the situation. Or other places could lower prices in order to get more customers during March Madness. But the brackets are almost a gimmick. ESPN probably makes more money then the average bracket tournament player due to the outcome of winning. It has been said that the average American is more likely to win the lottery than get 100% on a NCAA bracket. While so many people join leagues, the chance of winning is extremely slim.
ReplyDeleteWhile it’s true that if a school wins the tournament they will likely get more funding, I don’t know if the money goes towards academics. I think it’s funneled back into the athletic program, but either way it’s beneficial to the students. Just like with any other activity, watching March Madness is never as transparent as it might seem. Like you said, if they want to really be active in the tournament people will buy apparel and spend time and money going out with friends to watch the games. When you buy into one thing it makes you feel more inclined to buy into other aspects of that same thing, which is good for the producer but bad for your budget.
ReplyDeleteGreat topic as March Madness just started yesterday! This time of year is extremely popular not only for regular basketball watchers but for people who enjoy these exciting games in this tournament. It's fun to be apart of it by making a bracket before the tournament begins, maybe even making some money off of lucky picks! Since this NCAA sponsored tournament is watched throughout the nation, it racks in huge money. While it's still enjoyable to watch the games at home with family and friends and a front row spot, it's even more fun to be apart of it all at the games. However, as you mentioned the price is outrageous--especially getting further into the tournament! There is so much competition throughout the few weeks of March Madness, but it's an enjoyable event and it brings in the racks of money.
ReplyDeleteThis year is the first real year I have participated fully in March Madness, I've made a bracket and haven't let go of my phone since the start. But I was wondering besides the schools and the host cities who else gets a cut of the March Madness profit, surly television providers, ESPN, or NCAA, and other companies must be generating large amounts of money from this and along with Dylan, what about the players? why don't they receive a share for all they work they do?
ReplyDeleteThis is a great topic to talk about right now because I’m sure it’s on mostly everyone’s mind. Even now as I’m typing this comment I’m glancing at the scores of the Michigan State- Georgia game, State is winning 60-52 right now by the way. This brings up a whole ‘nother topic however. The playoffs help circulate money and boost the economy for the whole nation. The best way to solve an economic crisis is to circulate money faster and March Madness does just that. It creates extra reasons for people to spend their money, and attractive reasons at that. If the government could somehow artificially create a way to circulate money around the country quicker, maybe our debt crisis would be solved in the end.
ReplyDeleteI never realized how much of a economical benefit schools received from winning March Madness but it is such a huge event that almost everyone gets involved in. Also, that's insane the amount of money someone can receive by making the perfect bracket. I'm not sure if it's true, but no one has ever made a perfect bracket and the chances of doing so are very slim.
ReplyDeleteI really like the topic you chose because I love March Madness. I happen to be one of those people who make brackets and enter them into pools. I normally don't waste time watching too much college basketball but as this time of year comes around I find it hard to stay away from my TV or other electronic devices such as my phone to keep up with my bracket and who's playing. However, I'm defiantly not the only person who ends up wasting money on this tournament. This tournament is a great way to sell team wear and tickets along with gambling away your money. All the money helps benefits universities and businesses involved all over the country which is a big plus besides enjoying the tournament and cheering for your favorite team. Nice job on this post!
ReplyDeleteMarch Madness is one of the biggest times of the sporting year, bringing in viewers from all across the country and all across the world. For many, this event is the single most important sporting activity throughout the entire year. Not only does it bring excitement and anticipation all across the globe, but also recognition and income for universities and companies across the nation. With sales increasing ten-fold during this time of year on apparel of ones favorite team, memorabilia of the tournament, or simply a trip out to a bar or restaurant to watch your favorite team with friends, businesses and education institutions across the nation see great increases in revenue during this time of year. This doesn't even account for the ticket sales and revenue achieved by venues hosting this incredible event. Overall, this is one of if not the greatest time of the year.
ReplyDeleteI do agree March Madness is a crazy time of the year and yes it causes many negative externalities. What most people forget is that its all based on luck. The March Madness brackets that people create have no equilibrium whatsoever. In fact since most people enjoy March madness I wouldn't be surprised it there was a surplus of people joining the online brackets and betting money. You're right the employers have it hard, but they can always take it away. March Madness is considered a luxury good to most people so that means that it is elastic. Its not need, people can survive without watching it in the work place. Now for colleges it might be a little bit more of an inelastic good because it provides money to the winning school allowing them to keep their sports programs open. Revenue from this event is great but its not really helping all the colleges its only helping one. All in all people can live without March Madness.
ReplyDeleteMarch Madness comes with its share of both positive and negative externalities. On the positive side, it is a huge revenue generator. Team merchandise, soda and snack foods, etc. bring in large amounts of profit for sellers. Not to mention the tickets themselves, as you mentioned, scarcity plays a large role in driving up ticket prices. However, students and workers alike reduce their productivity to watch the games, lowering their productivity. Overall however, March Madness is a fun and exciting time, and generally, benefits society as a whole.
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