CBS prepares for March Madne$$

The network hopes to juice more ad revenue from basketball junkies by offering NCAA tournament games online for free.

By Paul R. La Monica, CNNMoney.com editor at large

NEW YORK (CNNMoney.com) -- It's March. And you know what that means. For many Americans the world will stop and the only thing that will matter to them is what their brackets look like in their college basketball office pools.

Starting on March 15, the men's NCAA college basketball tournament, more commonly known as March Madness or The Big Dance, kicks off in earnest. Games begin shortly after noon EST and all told, 32 games will be played on the 15th and Friday, March 16th.

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For the second year in a row, college basketball fans (or those merely obsessed with their NCAA office pool) can watch March Madness games for free online.
FUN MONEY TECHNOLOGY
March Madness: A CBS $lam dunk
Ad spending on the NCAA basketball tournament has soared recently.
Year Total ad spending ($mill)
2001 310
2002 348
2003 362
2004 436
2005 468
2006 497
Source:TNS Media Intelligence

The NCAA tournament is a financial boon for broadcasting company CBS (Charts), which has the exclusive rights to air March Madness games on television. According to figures from advertising research firm TNS Media Intelligence, TV ad spending during this year's tournament is expected to surpass $500 million, a record high.

And for the second year in a row, CBS is hoping to generate even more interest (and revenue) from college hoops by streaming live games for free on the Internet in conjunction with its CBS SportsLine and CSTV online units.

Users can watch any game they want online (Go Penn Quakers!), except the game being aired on the local CBS station in their market at that time. The online games feature commercials that are different from the commercials airing on the TV telecasts.

Last year, CBS decided to show games for free online, instead of charging $19.95 for the online service as it did in years past. The decision wound up being a slam dunk success for the media company, as 1.3 million users signed up for the March Madness on Demand package and wound up watching over 19 million streams.

CBS also has partnered with satellite TV firm DirecTV to offer a Mega March Madness package of all NCAA games for $69 to DirecTV (Charts) subscribers.

This year, CBS expects even more basketball junkies to sign up for the online games - and the company hopes to avoid some of the technical glitches that plagued the offering last year.

Last year, for instance, people who did not sign up in advance for a VIP package often had to wait a couple of minutes before they were able to log-in to the site and view the game, according to CBS Interactive chief operating officer Steve Snyder.

He said CBS learned from those problems and decided this year to double the server capacity in order to handle more traffic. Snyder also said CBS is increasing the rate that videos are streamed, and is boosting the default size of the screen on the video player.

CBS said it worked with Internet content delivery firm Akamai Technologies (Charts) as well as Major League Baseball Advance Media, the interactive arm of MLB, on the technology to power March Madness on Demand.

"Getting the video more front and center, as simple as that sounds, is the priority," he said.

One sports media expert said that it will be crucial for CBS to fix last year's technical constraints if it hopes to once again generate strong traffic.

"I don't think the definition of 'on demand' means that you should have to wait and wait," said John Rowady, president of rEvolution, a sports marketing and media firm based in Chicago. "I'm not surprised that the service wasn't prepared to handle demand last year, but the problem was addressed this year. Everybody who signed up last year will have curiosity to see if the experience is better."

Still, despite the improvements, Snyder said people who wait to the last minute to register for the service could wind up waiting a little bit for a game to stream. Snyder said CBS has made 400,000 VIP passes available, up from 250,000 last year, and that users have already registered for about half of them.

"The fact that it's a scarce resource is not a bad thing. We would prefer to serve everybody but it is not fiscally or technically responsible to do so," he said.

The technical issues don't appear to be having an impact on advertisers though. Last year, about 20 companies agreed to advertise on the March Madness on Demand product. This year, Snyder said there are more than 30 advertisers.

Several of last year's key advertisers, including Dell (Charts), Marriott (Charts) and State Farm, are back this year, Snyder said. New advertisers include AT&T (Charts) and its Cingular Wireless unit, as well as Kraft Foods (Charts), which will be promoting its DiGiorno frozen pizza.

Synder said that so far, March Madness on Demand has generated about $9 million in ad revenue, up from $4 million last year. And he said the service's profits have increased six-fold.

Sure, $9 million in ad sales may seem relatively small, especially when you consider that CBS was able to get $2.6 million for a 30-second spot during last month's Super Bowl telecast.

But live online sports events are becoming increasingly attractive to big marketers, which are willing to pay up to reach an even more captive and loyal audience.

John Rash, senior vice president and director of media negotiations with Campbell Mithun, a media buying firm based in Minneapolis, said March Madness on Demand is a good complement for advertisers who are also running commercials during CBS' TV broadcasts of the NCAA Tournament.

That's because the online component can also reach people who are watching games at the office (many of the games during the first round air in the middle of the day), or would rather watch games that are not aired on their local CBS affiliate, he said.

"This is a tailor-made opportunity to take the interest that already exists in the NCAA tournament and speak to people who are watching at work and out-of-market games," said Rash, who bought ads on March Madness on Demand for insurance company The Hartford Financial Services Group.

Another media buying executive agreed that companies who are advertising during the national broadcasts on CBS probably could get even more bang for their buck by advertising online.

"Sports fans are fanatical and they will find games one way or another," said Kari Hooper, associate director with Starcom USA, a media buying firm based in Chicago. "If you are a sports advertiser you are likely to be interested in this opportunity. It's a no-brainer. If you are going to be a March Madness sponsor on TV, I would highly recommend you be a sponsor online as well."

rEvolution's Rowady adds that advertising during all aspects of the NCAA tournament offers marketers a more cost-effective and efficient way to reach viewers since it gives them the chance to get their commercials seen frequently, as opposed to the one-shot nature of the Super Bowl.

"March Madness is the only major sporting event that we do in America year-in and year-out that's a festival. It lasts for most of the month and leads into April. That gives marketers a lot of advantages," he said. "The Super Bowl is a one-time only thing. The lasting effect of advertising during March Madness is so much more expansive."

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.