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MLS Apr 02, 2010

How the new MLS Designated Player rules should help youth development

By Chris Hummer

As someone who spends nearly every day floating between the “mainstream” worlds of youth player development and professional soccer news coverage, I sometimes spot connections between the two that rarely come up in the reporting “angles” taken either by professional soccer writers in the US, or the sideline chatter on the youth training field by coaches.

The new rules announced yesterday by Major League Soccer, which effectively allow any team to have up to three “David Beckhams” is one such example, that I feel should be thrown out there. In my opinion, this is much more than really big news for fans, coaches and general managers within the MLS daily grind; I think this is a HUGE piece of news for our youth development program here in the USA.

The “why” is where I think some of the coverage so far has missed the plot. It’s a little buried though, so let me first explain the new Designated Player rules, then I’ll discuss its potential impact on our youth development.

OLD RULE
Each MLS team was allowed to field one (1) Designated Player (unless they traded with another team to receive/forfeit a spot). David Beckham was the first such player, and has been followed by others, such as Freddie Ljunberg in Seattle, and Juan Pablo Angel in New Jersey. In the past, no matter how much the team paid in salary for a “DP”, only the first $415,000 counted against the league-imposed salary cap of $2.31 Million – or approximately 18% of the total amount a team could spend on their entire 24-player roster (less a few other tricks that are too complex to describe in this article).

Under that system, there was just no way for a team to avoid a significant “cap hit”, no matter how much cash they had, or believed they would earn from that player’s presence. This made it difficult for a lot of teams to even consider a DP, because they were more concerned with being able to pay enough to the other 23 guys in order to be competitive.

It did not matter how successful the DP signing was for a team, the only incentive was still tied directly to the player. Could they win games? Could they sell tickets?

NEW RULE
Each MLS team is now allowed up to three (3) DPs. No trades allowed. Everyone gets three (though the 3rd costs a $250,000 non-cap-hitting penalty). Same as before, no matter how much a team pays their DP, only the first part of their salary counts against the salary cap. The difference now is that amount is only $335,000, or $80,000 less than before. PLUS, the overall team salary cap went up to $2.55 Million for this season as a result of the new collective bargaining agreement established last month.

This change instantly reduced the impact of a DP like David Beckham on the LA Galaxy to only about 13% of the overall salary cap budget – without lifting a finger, or changing a player contract. That’s a big enough benefit right there. However, now a team with the bankroll can add a second DP – at $335,000 in salary hit, and only have $670,000 of it count against their $2.55 Million cap – or about 25% of overall team salary. A third? $1,005,000 – or about 40%. That might sound like a lot, but there’s a catch…

Each team NOW has the ability to buy-down their salary cap hit with what is called “Allocation Money”. Allocation money is afforded to each team by MLS from several different sources – which we’ll discuss in a bit. Each team can use allocation money to buy-down their salary cap hit from a DP to just $150,000 each! So, with enough allocation money accumulated, a team could have three designated players for little more than what one cost them in salary last season – $450,000 total, compared to $415,000 last season.

That is still just 18% of their total salary cap hit, but it’s for three players, not one. That means teams have 82% of their salary cap left to spend on more players (21). This effectively is even less of an impact on a team’s competitive salary cap than it was last year with just one DP! That is an extremely big deal, and something every team should be excited about.

Now, a team could have Landon Donovan, David Beckham, and Thierry Henry all on the field at the same time, and still have eight other guys of a very high quality (6-figure salaries) by MLS standards. That would be a major step up on the quality of a team, while spreading some “marquee risk” on putting your entire 18% DP hit on one person – who might get hurt, or not perform to DP expectations (Beckham, Emilio). This will make it very difficult for other MLS teams to sit back and not take on their own DPs.

SO, WHAT ABOUT THAT YOUTH DEVELOPMENT?
Simple. It’s this ability to buy-down a DPs salary cap impact from $335,000 to $150,000 with Allocation Money that answers the question. Accumulating allocation money can now have a major impact in a team’s on-field performance, and marquee drawing power. And the best way to get large amounts of allocation money on the books is to sell players.

While allocation money can come from several sources, the biggest comes when a team sells a player to another league, like when Jozy Altidore was sold to Spain for $10 Million two years ago, or the $20+ Million Landon Donovan is likely to attract if he plays as well at the World Cup as he did for Everton this winter while on loan.

With teams pocketing a large part of those transfer fees as allocation money, and earning more revenue with big name DPs, MLS will finally have given teams the ability to buy their way to the top half of the league on a regular basis. That is the capitalistic, American-way that will benefit our youth development.

Teams will, for the first time, have a financial incentive to identify, develop, promote to first team, and then sell young talent. Find the next Jozy Altidore? Sell him in three years for $10 Million and cover your team’s $555,000 annual DP buy-down for three players for several years.

Of course, teams have had the ability to develop and sell players to pocket allocation money for several years. However, until now there was just no clear way to turn that money into immediate wins on the field, or “butts in seats” – as they say.

This new rule is the most American thing MLS has done for the soccer business since it tried the tiebreaker shoot-out, only this is a ‘good’ American thing for soccer. It creates a new free market economy for the team owners that will let capitalism drive a lot more front office decisions on investment in players – and hopefully, youth academies. But it does it while still maintaining a single-entity league structure, and still keeping teams from gaining too unfair an advantage with their checkbooks, like what happen in the ‘70s with the NASL.

If this doesn’t lead to some of the most progressive clubs moving to at least a hybrid residential academy system for their youth, I don’t know what else will – at least until the entire league is profitable. At the very least, the allure of allocation money should increase spending on the youth front in good ways, and that is what we need.

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Chris Hummer is Founder and President of HummerSport, LLC, publisher of Potomac Soccer Wire and numerous other soccer-focused web sites. Off the field, Chris spends his days running his soccer company, writing about soccer, and performing his duties as Assistant Director of Coaching for a prominent youth soccer club in Virgina, and member of the Elite Clubs National League. On the field (and sidelines) he is a USSF B licensed coach with 10 years experience and 31 years of playing experience (and counting). Hummer is a Head Coach and Trainer for multiple teams, and also enjoys spending springs with the local high school team as an Assistant Varsity coach. You can reach Chris at [email protected].

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