Signs of MLS “Loosening the Noose of Parity”

People say you shouldn’t quote yourself in essays, but this is the internet and I won’t get in trouble for plagiarizing myself.

From April 7 2011, posted to an article on http://thecup.us

“I think that as the noose of parity in MLS is loosened, teams will be more able and willing to pick their competition. As true league hierarchy develops, some teams will see themselves as “cup teams” like Spurs and Pompey in England. Not to pick on anyone, but a team like Portland (arbitrary choice) who doesn’t have a great chance of winning the Supporter’s Shield, an outside chance at a play-off run and isn’t qualified for CCL, would choose to field full teams for all cup games and, in doing so, promote the importance of the competition.”

League hierarchy might take a while to develop, as in the 2011 season 10 out of 18 teams made the playoffs and thus, 56% of teams had a shot at winning the postseason prize MLS cup.  But there have been encouraging signs of MLS league administration allowing more financial freedom to clubs to decide their own destinies.

Firstly, there is the Designated Player rule which was instituted way back in 2007.  Originally nicknamed the “Beckham Rule,” it allows a club to designate one player to exempt from the full salary restrictions.  The player still counted against the salary cap for $400,000 (which is paid for by the league), but any wages over that would be provided by the individual club.  Other notable DP’s included Cuauhtemoc Blanco, Juan Pablo Angel and former USMNT captain Claudio Reyna.  Teams not interested in shelling out the big bucks could trade their DP slot to another team like New York or Los Angeles for allocation money or player rights.  The rationale for the DP rule was to allow teams to bring in an exciting attacking player to generate interest and and raise the profile of the team.

Generation Adidas players are youths signed by the league before the MLS draft.  Their contracts are paid in full by a combination of the league and Adidas, so they don’t count against a team’s cap at all.  They are usually the most promising American talents from colleges and universities across the country.  The most extensive scouting network in the United States is run and operated by the MLS office itself.  There was something similar to this before, in a deal with Nike; I think Project Nike 40, which ultimately failed.  The rationale for the GA program is to tie down the most exciting prospects in America (at no cost to the clubs) in an attempt to prevent them from going to Europe for more than the guaranteed rookie compensation in MLS.

On November 12, 2008, Tristan Bowen was signed by the Los Angeles Galaxy directly from their academy without subjecting him to the MLS Superdraft.  This process is called the Homegrown Player exception to the roster restrictions.  This rule applies to players that were trained in an MLS club’s youth academy system for at least a year and then signed to a professional contract.  These players don’t count against the salary cap and I think don’t count against the roster size limits, either.  Other notable Homegrown Players include US youth internationals Juan Agudelo for the New York Red Bulls, Zac Pfeffer for the Philadelphia Union and Jack McBean for the Los Angeles Galaxy.  Since Bowen, 47 players have been signed by 17 MLS clubs through the Homegrown player initiative.  The rationale here is to reward clubs with successful academy systems and to allow talented youth players to play for their local clubs.

In early 2009, after a lengthy arbitration period between the player’s union and the league, MLS front office announced that a new collective bargaining agreement had been reached.  Central to negotiations were an increase in the guaranteed minimum entry salary and an increase in the team salary cap. Also, there was an increase in the roster size from 25 players to 30 to accommodate complaints about scheduling conflicts with the league, the cup and CCL.  There were also tweaks made to the re-entry draft process for players whose contracts run out.

Then, recently, in 2010, the league gave every team two Designated Player slots, decreased the amount of salary counting against the cap to $335,000 and allowed teams to sign a third DP if they paid a luxury tax.  The luxury tax ($250,000) acted the same as the salary cap in baseball, where the “tax” money is divided among the rest of the teams not paying the tax.  A corollary to this rule change was forbidding the trade of slots to other teams, though international slot shifting was still an option.  This rule allowed New York Red Bulls, Los Angeles Galaxy and Toronto FC to all acquire 3 Designated Players (Henry + Marquez + Rost, Beckham + Donovan + Keane, de Guzman + Frings + Koevermans, respectively).

Even more recently, in August 2011 the league augmented the designated player rule in favor of youth.  After witnessing the success FC Dallas had in signing Fabian Castillo (a Colombian youth international), the league had a moment of clarity.  They wanted to entice teams to take the risk in signing good (and I mean good) youth talent from around the Americas especially, but the rest of the world as well.  To do so, the league decreased the amount of salary that young DPs counted against a team’s cap, $200,000 for players 21 to 23 and $150,000 for players under 21.  Also the luxury tax does not come into affect if a team signs a youth DP.  This means that teams don’t have to gamble as much of their team salary on a signing that might not pan out.  In theory, this means that MLS clubs are more likely to sign players like Castillo and Cristian Nazarit (Colombian youth talent who played last season for Chicago Fire, which included the US Open Cup match in Rochester), without having to give up as much of their squad depth.  Of course, what the league doesn’t pay for the team has to cough up, but that’s a price many teams may be willing to make.  By signing a very skillful Latin American player (or any other youth international) under the age of 21 to a long term deal, an MLS team is making an investment in the future success of their club.  This change comes into effect for the upcoming 2012 season and look for second tier clubs (in terms of money, not on-field product) after LA and NY like Chicago and Seattle to take advantage of this rule.

All of these developments in the relationship between the league and the MLS club show a trend of power transferring away from the central authority and towards the individual team management.  And that’s a very good thing.

Clearly, the league still commands a great deal of power in terms of signing contracts and holding player rights, but I feel very strongly that the changes of the last five years will only improve the quality of the league as individual clubs are given more control over running their team.  This will allow teams to develop priorities with regard to the US Open Cup, Supporters’ Shield, MLS Cup and Concacaf Champions’ League; but also in terms of how much money to invest in youth development like Real Salt Lake’s residential academy in Arizona.

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