A Cash Monster: Basketball & March Madness
Mar 29th 2013 7:19PM
Updated Mar 29th 2013 7:20PM
With each passing year, the growing popularity of the March Madness continues to astound me.
In fact, according research from Challenger, Gray & Christmas, an estimated 3 million employees recently said they would spend between one and three hours per day watching this year's tournament during work hours, potentially costing American companies more than $134 million in "lost wages" over the first two days of March Madness alone. Of course, that assumes each of those workers would have been productive otherwise, which is certainly a debatable topic in its own right.
Now don't get me wrong. I love college basketball and recognize the many reasons the NCAA tournament is so alluring, from its rowdy fans to the inevitable stunning upsets and the obvious irony that unpaid players can consistently bring such passion to the game.
Watching the games
Of course, this unique mix helped drive nearly 21 million people to watch last year's championship game and helps explain why CBS and Time Warner's Turner Broadcasting were willing to pay $10.8 billion three years ago to secure broadcast rights for the tournament through 2024, outbidding rival offers at the time from such competitors as Fox and Disney's ABC and ESPN.
Of course, that easily eclipsed CBS's previous $6 billion, 11-year deal that began in 2003 and absolutely dwarfs the old seven-year, $1.725 billion agreement that ran from 1995 through the end of 2002.
Watching the ads
So why, exactly, did CBS and Turner have to pay so much this time around? According to research firm Kantar Media, NCAA men's basketball last year became the first-ever postseason sport for which national TV ad spending exceeded the $1 billion mark.
You read that right: March Madness ad spending in 2012 managed to outpace even the NFL's postseason take, which came in at a respectable $976.3 million. What's more, advertisers spent more dough on the NCAA tournament in 2012 alone than on the NBA, MLB, and the NHL postseasons combined.
In addition, those companies were willing to spend more than $1.3 million for each 30-second spot in last year's NCAA championship game, or more than triple the cost of an ad to appear in the NBA championship series games. Even still, and perhaps unsurprisingly, Super Bowl commercials still took the cake in 2012 at an average cost of $3.5 million.
So who's willing to spend those big bucks to get their names out to the masses? General Motors was last year's whale, dropping a grand total of $80.3 million and leaving AT&T a distant second at $54.2 million. Naturally, Anheuser-Busch InBev and Coca-Cola were both eager to quench viewers' thirst, throwing down $31.9 million and $31.7 million, respectively.
There was also no shortage of restaurant advertisements from the likes of Dominos Pizza and Yum! Brands-owned Pizza Hut, but the well-suited and comparatively small Buffalo Wild Wings -- which incidentally remains a prominent NCAA sponsor this year -- seemed to have gotten the best bang for its buck in 2012. Despite not even showing up in Kantor's list of top 10 spenders last year, B-Dubs' lone ad was aired a whopping 58 times throughout the course of the tournament, a number only bested by frequent ads for Capital One's Venture Card and Apple's iPad.
Dressed for success
Nike, for its part, doesn't need to spend much on traditional advertisements when viewers can plainly see the uniforms it provided to 52 of the 68 teams in the 2013 tournament. Then again, I suppose that shouldn't come as much of a surprise considering the $52 billion behemoth's perennial stranglehold on the global basketball shoe market.
Even so, Adidas did manage to place its name with 13 qualifying teams this year, including three of the four No. 1 seeds: Louisville, Kansas, and Indiana. Finally, trailing the pack was aspiring performance apparel specialist Under Armour, which lent its logo to the remaining three teams: Temple, South Dakota State, and La Salle.
Foolish final four
Like it or not, there's no denying March Madness presents big opportunities for quite literally dozens of businesses. When the ball hits the court, though, I'm convinced a few of the above companies stand out from the pack with regard to their potential to benefit in this case.
First and second are CBS and Time Warner. While they undoubtedly spent a boatload for the broadcast rights, the tournament's growing popularity is increasingly making it look like a great investment for the two companies, and I have little doubt it will only get better by the time their contract expires in 2024.
Next, though many companies came out swinging big with ad spending last year, I like Buffalo Wild Wings for its great fit with the tourney and savvy strategy of making the most of its small size.
Last but not least, I've made no mystery of my love for Under Armour as a long-term investment, and this time is no different. While Under Armour only had its name on three teams this year, UA-sponsored No. 13 seed La Salle managed to beat No. 4 seed Kansas State en route to the Sweet 16 as of this writing, and Under Armour's ninth-ranked Temple has nothing to be ashamed of after its 52-58 loss in the second round to No. 1 seed Indiana. Like Buffalo Wild Wings, then, it's safe to say Under Armour made the most with what it had.
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The article A Cash Monster: Basketball & March Madness originally appeared on Fool.com.Fool contributor Steve Symington owns shares of Under Armour. The Motley Fool recommends Apple, Buffalo Wild Wings, Coca-Cola, General Motors, Nike, Under Armour, and Walt Disney. It owns shares of Apple, Buffalo Wild Wings, Nike, Under Armour, and Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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