Tuesday, December 27, 2011

College Football Playoffs Are a Goldmine

With another college football bowl season having been sufficiently tampered with by the BCS to lose much of its luster, fans clamoring louder than ever for a playoff, and all-the-while the NCAA effectively looking the other way while the purse-strings of its post-season are given away to conference big-wigs and bowl committee fat cats, it is perhaps time to shout something in a language that the parties in power will listen to… "$$$!".

The current BCS system is quite lucrative for those involved (both personally and organizationally), and thus there has been very little momentum to change it.  But greed (or self-interest as you may prefer to call it) could perhaps move them when nothing else will.  So, that begs the question… just how much money would a college football playoff be worth?  How much money is being left on the table?  Knowing any additional revenue would have to feed more mouths, would it be enough make a difference?

To answer this, let’s take a look at the impact that March Madness, the NCAA Men’s basketball tournament has had on its respective basketball post-season, both in terms of ratings and revenue (2007-11 averages).

Average NCAA Men's Basketball TV Ratings (household ratings)
1.1    Regular season games (ave of 131 games on ESPN in 2011)
6.4    March Madness tournament (all games)
12.0  Championship game

The tournament represents a nearly a 6x bump over the regular season, with the championship about 2x that.  Here is how the NFL stacks up, with a similar ratio for the championship and playoffs, only with the regular season appearing much more significant (who says that a playoff would eliminate the value of the regular season?).

Average NFL TV Ratings (household ratings)
10.0   Regular season games
20.2   Playoffs
43.7   Super Bowl

So what does College Football look like?

Average NCAA College Football TV Ratings (household ratings)
1.7   Regular season games
4.0   All bowl games
15.7  BCS Championship Game

In comparison to college basketball and the NFL, the obvious outlier here is the post-season, where the bowls are only about 25% of the championship ratings, even though you would expect it to be closer to half.  And, considering that college football is more popular than college basketball (12% of American list it as their favorite sport and 53% consider themselves fans, compared to 4%/47% for college basketball, and 31%/63% for the NFL, per Gallup and Harris Interactive), you would expect that to potentially be even higher.

If you assume the same bump that college basketball gets, here are the projected college football playoff TV ratings:

Sport                        Reg Season      Playoffs        Championship
NCAA FB                    1.7                    4.0 (2.3x)      15.7 (9.0x)
Men’s BB                    1.1                    6.4 (6.1x)      12.0 (11.5x)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 
NCAA FB (Proj)          1.7                   10.5 (6.1x)    19.9 (11.5x)

How would those increased ratings translate into dollars?  With its current TV ratings, the going ad rate is $1.14M for a 30 second commercial (2010).  With a project 27% increase in ratings, we would assume a corresponding average 27% increase in ad rates to $1.45M.

The current contract with ESPN pays out $125M/year for four games (BCS title game, Fiest, Orange, and Sugar Bowl), getting the ratings and ad revenue above.  A playoff would not only include a 27% increase in ad prices, but would also include several additional games.  Assuming the title game generates the most revenue and in proportion with its ratings, the value of a playoff is below:

Format                     Title Game   + Games      $/Game        Gross       Gain
BCS (current)           $51.3M              3             $24.6M       $125M       --
8 Team Playoff          $61.3M              6             $32.5M       $256M     $131M
16 Team Playoff        $61.3M            10             $32.5M       $386M     $261M

Moving to even an 8 team playoff would gross more than double the current take!!  And a 16 team playoff?  Triple!!!  

After netting out the current revenue from the games that would be sucked into a playoff (average of $6.25M per game), the money being left on the table is still mind-boggling:

Format                     + Games     Gross       Less ($ x gm)   Net Gain
BCS (current)             3             $125M         --                       --
8 Team Playoff            6             $256M       $18.8M              $112M
16 Team Playoff        10             $386M       $43.8M              $217M

Of course there are lots of other arguments for and against a playoff, but with dollars like these, it is only a matter of when—as we have seen, dollars are the only thing that matters (San Diego State in the Big East, anyone?).  A playoff will happen.

So why hasn’t it happened yet?  One can only believe that those in charge are able to see the $$$ writing on the wall, and are trying to figure out how to move toward a playoff AND keep the piggy bank.  A quick or radical change would likely involve splitting up the new revenue much more equally than will be required if they can do it slowly.

1 comment:

  1. Good article. While the BCS teams can probably not be forced into a playoff, it makes sense for the non-BCS teams to have a playoff. Unlike the bowl system, it would produce money, and provide much more exposure for the nonBCS teams.

    Having a 16-team nonBCS tournament would also be a huge PR coup. Have the first 3 rounds at the home site of the higher seed, then the final game on MLK day.

    There are also a couple of other visibility gains from such a tournament. The winner would shoot up in the rankings, providing PR value. The finalists would also be able to dominate categories such as total yards, total points, total TD's, thus having "record breaking" players. It would really increase the marketability of the teams involved.

    The best way we have of getting rid of the bowl system is by showing leadership and starting a 16-team non-BCS playoff.

    ReplyDelete