“It depends” is a frustrating answer to any question. I hate it. Even if it’s the answer that makes the most sense. In today’s post, which I hope will live on as an evergreen document, I’m not going to use that answer.
The question at hand: What is the best way to build an MLS squad using the myriad of complicated MLS roster rules: salary cap, designated players, GAM, TAM, Allocation Order, Loans, Superdraft, etc?
The answer: There are right ways and wrong ways to use each of the complicated MLS roster mechanics. Period. It does not depend. Welcome to the MLS Squad Construction 2018 User Manual. I advise you to put on a fresh pot of coffee, and perhaps, bookmark this page.
While I will touch on some of the major rules, generally speaking, this post is not an explainer of the MLS Roster rules (like you can find here). Instead, it provides pointers on how best to take advantage of each of the key roster requirements, rules, and mechanisms to create a superior squad structure. I should note that this analysis is based not as much in empirical method but in one of intuitive theory. I believe it is a sound underlying logic but please chime in by commenting on the post if you have questions or concerns.
Get ready for a long list of “Do”s and “Don’t”s for any MLS Front Office. Nashville SC, this one is free, the next one will cost you. LAFC, I still haven’t received that check you promised. Here is a table of contents for what is to follow:
MLS Squad Construction Manual
- Introduction to Framework
- Allocation Money as Increased Budget (not as tradable asset)
- Designated Players and Young DP Savings
- The Option Value of Loans and Subsidized Wages
- Monetizing Allocation Order Ranking
- Differences between GAM and TAM
- International Slots & Investing in Scouting/Analytics
- Limited value of SuperDraft picks
- The real benefit of Homegrown Player Contracts
1. Introduction to Framework
Major League Soccer is a league of relative parity compared to other leagues around the world. This is by design as it is a single entity and the parity enforced via a complex set of roster construction rules orbiting mostly around a “salary cap” or “salary budget” depending on how technical you want to be. The broad strokes are that 20 senior players per team carry with them a “charge” that for most of them equals the wages they are paid by the league as a whole (single entity), no single player can have a charge higher than $480K (players who earn more than $480K are only allowed on a roster through the use of various other mechanisms like “Designated Players” and “Allocation money”), and the total “budget charges” on a team cannot exceed $3.8M (2017 amounts).
There’s a lot I want to discuss here, and I have given this a go before, but the core of what I’m going to talk about in this post is the general idea of maximizing a team’s talent given these roster constraints. As a general rule, I’m going to roll with the idea that wages (not transfer fees) are the better measure of a player’s competitive value on the field (outside of what his value as an asset might be in a cap or non cap environment). I first read about this in Soccernomics, but it’s a basically intuitive concept that on the whole, better players demand better wages, and so a team with higher wages generally has better players. I don’t want to get hung up on this point – we’re just going to need to accept it as a general fact – even though as I Google it, it appears some do take exception to the idea. And of course, teams make mistakes in signings. Regardless, it’s helpful to understand how to fit more wages into the constraints of the MLS Salary Budget given that most wages are funded centrally by the league and so with the exception of designated players, maximizing league-funded wages relative to a club’s competition does not come at an incremental cost to the individual club. And salary information is publicly available for MLS players.
Total Wages & League Parity
So I started by saying that there’s relative parity, and that all the teams have this “salary cap” thing of $3.8M, right? Yea, sort of. Here are the actual player wages paid by each MLS team in 2017 courtesy of Steve Fenn‘s excellent Tableau Viz:
These are the total team wages (players 1 – 29), not just the Senior players (1-20) whose charges must sum to the $3.8M budget cap. But the point should be clear, that while there is a salary budget/cap in place, teams pay vastly different total wage bills. Most of this variance is tied up in the optional signing of designated players whose wages can be as high as the individual owners are willing to fund them with the team taking only the league-funded $480K charge per DP against the $3.8M budget. What happens if we exclude DPs? While I’m working with a slightly different data source, here is a graph I put together of just the non-DP wages by team in 2017 (the league-funded wages):
What you can see is that on a total dollar measure, the disparity between the teams is greatly reduced once you take away the excess wages supplied by individual owners directly for the designated players. On a low to high basis, we go from a range of $5M-$23M to $4M-$7M. There’s some timing noise in my numbers above, and I’ve done my best to add back the “league funded portion” of each team’s DP wages (200K for a young DP, 480K for any other). But an important reality is that once you take away all excess owner funding for designated players (a max of 3) and you’re just staring at the allocation of central league-funded wages (the salary budget), there’s still a not insignificant amount of room to maneuver if your goal is to maximize your team’s league funded wages relative to the rest of the league (as a proxy for maximizing your team’s talent relative to the rest of the league).
I should mention that while most of this article talks about the importance of maximizing league-funded wage bill, it is absolutely important to get your signings right also. All things considered, Orlando City popping up atop that graph above shouldn’t dissuade you from believing that more league-funded wages is better. They just signed some bad expensive players over their life (and to be fair, they only paid half of Dwyer’s wage this year and it’s counting his annual salary in the above).
2. Allocation Money as Increased Budget (not as a tradable asset)
The disparities in league funded team wages originate in several places, but the largest driver is Targeted Allocation Money (TAM). Each team received $500K in 2015, $800K in 2016, and $1.2M of TAM in 2017 (and there are reports of a fresh batch of $2M+ coming in 2018). This pool of league funds has several uses. Its primary use is that it allows teams to pay players that make more than the maximum budget charge and still comply with the roster rules without having to tag them as designated player (using TAM to pay down the wages of high earners to the max charge). As an example, this might allow a team to pay a total of $5.2M in non-DP wages even though the cap is $3.8M. TAM can also be applied to a transfer fee which otherwise would blow up a team’s budget number or require the player to be tagged as a designated player. And, it can be traded between teams. So already, we’ve got 1 way to use TAM that increases your team’s wages relative to other teams, and 2 ways that do not.
If you could choose between 1) signing a player for free who is worthy of a $700K wage by applying TAM to his wage and 2) paying a $500K transfer fee for a player worthy of a $200K wage and applying TAM to the transfer fee, it’s clear which one is the more efficient choice when building a squad in this rule-intensive environment. Find the players who are out of contract that can help your squad (seems obvious) and you’ll be able to pay higher wages than if you’d spent TAM to pay a transfer fee. And all else equal, the third option is even worse: trading your TAM to another MLS team for another MLS player’s contract (think of it like an intra-MLS transfer fee). Instead of spending your TAM money to purchase a player like in #2, you do that PLUS you give another MLS team more TAM –TAM that they can use to increase the wages of their roster relative to yours! Transactions like these are veritable “six-pointers.” If you trade someone $200K of TAM, they now have exactly $400K of potential wage budget more than you had before the transactions. If the primary framework of this post is to max out league-funded wages to build a stronger roster than your opponents, trading allocation money is bad.
Orlando City Examples (Good and Bad)
- As an example of what a team should do, Orlando City traded Kevin Molino (2017 guaranteed comp of $400K) to Minnesota United for $650K of allocation money. If Orlando City thought they could find a suitable replacement player on the international market demanding somewhere around $650K of transfer fee and $400K in wages, this move makes sense as they’d be extracting team wages from Minnesota, on net. Alternatively, if there was an international player out of contract somewhere that fit their needs, they’d potentially have $1M of cap room to play with to find a replacement TAM player (a real potential upgrade over Molino).
- As an example of what not to do, instead of using the allocation money they’d just received from Minnesota, halfway through the season Orlando City traded $1.6M of allocation money to acquire Dom Dwyer’s contract (2017 guaranteed comp of $670K) from SKC. Dwyer’s current contract requires its team to feed it a minimum of $180K of TAM in addition to the max budget charge of $480K. By making this trade Orlando has lowered its team’s league-funded wage bill relative to its peers while still taking on a big contract that requires continuous league assets to stay compliant. On top of this, it sounds like Dwyer’s contract is nearing its end and his next one will need to be DP level for him to re-sign, so it’s possible Orlando’s best case scenario and worst case scenarios for Dwyer are both difficult to swallow. Worst case (i think), he leaves when his contract is up, and the team effectively paid $1.6M for a season and a half of no playoffs. Best case, he signs and becomes a DP, and now he’s taking up one of those precious DP spots for $480K max cap charge.
- Rule: “Use” TAM to reduce a player’s cap hit to your team’s salary budget, don’t trade it to other teams. At least not for another MLS player contract.
- Sub-rule: If a team offers you TAM for a player that you can find a replacement for from outside MLS for similar money, go for it. You’re lowering their total potential league-funded wage bill. You will either use the received TAM to replace the player via transfer fee, or if you can find a similar player on a free, you can apply that TAM to those wages or increase your wage bill elsewhere while decreasing your competition’s overall roster strength.
- Sub-rule: These same principles should work for General Allocation Money (GAM) as well. GAM is like TAM but it has even greater utility in its flexibility.
3. Designated Players and Young DP Savings
Recall the chart above that showed most team wage inequality comes from designated players. This is obvious, but it is critical that a team “hit” on their 3 designated player signings. There are two different lenses we’ll view this from. First, the fan lens, where we can assume that our team’s owner has virtually infinite resources and does not consider transfer fees for designated players to be an investment. This is a simple thought exercise: simply sign the best players that are available and that you can convince to play at your club: most likely attacking players as goals and assists are hard to find. But there are simple ways to maximize your overall league-funded wages with designated players also: namely signing young designated players (aged 23 and younger) who only count $200K against the cap instead of the standard $480K. If you were to sign 3 stud young DPs instead of 3 DPs in their prime, you would have $840K of additional cap room to spend on strengthening the rest of your squad. This is a significant chunk of change: Tito Villalba, Victor Vazquez and Sascha Klestjan make around $650K each. However, I have to mention that if this is strictly the fan perspective first, you may not want to spend all 3 of your DP slots on young (potentially risky) players when you could buy 3 David Villas instead that are proven.
However, from an owner’s perspective — specifically an owner who cares both about having a winning team AND about internally financially prudent things like ROI — the 3 designated player slots should be thought of as investments to the extent that the players signed command significant transfer fees. If this is the case, the Young DP route is absolutely the way to go. First, we already mentioned the competitive advantage to the rest of the team’s budget structure ($200K vs $480K cap hits for each DP). Secondly, if you care about ROI, then any one-time transfer fee paid to another club around the world should be thought of as a prepaid asset and not as an expense. Simply put, you should be paying a transfer fee that you believe you can recoup when the player departs the club. And really, the only way to do that is to sign a young player whose value is still on the rise. The goal doesn’t even need to be to receive more than you paid, simply to recoup. You can’t do that with an established player but you can with a young player. The cap room you save by signing young DPs will allow you to strengthen elsewhere with veterans.
Good examples of this are FC Dallas (who filled all 3 2017 DP slots with young DPs, successfully generating that extra $840K budget amount) and Atlanta United whose Almiron and Villalba counted as young DPs (a combined $400K against the cap instead of $960K), allowing them to spend $325K on an expensive veteran CB like Michael Parkhurst to captain the expansion side. Below is a breakdown of the 2017 DP wages.
- Rule: Sign young DPs instead of old ones to a) gain an $840K budget advantage with which to strengthen the rest of your squad and b) to increase the chance of eventually recouping transfer fees paid to sign your DPs, and c) increase the chance of turning a profit on the player’s departure, which could add up to $650K of GAM to your team’s overall budget (or more, if they change the rule).
4. The option value of loans and subsidized wages
If we maintain our goal of increasing the squad’s wage bill relative to the competition, there’s another tool to add to the kit. It is customary in global football for clubs to loan young players to one another for half seasons or seasons at a time. Acquiring players on loan is helpful in MLS for a few reasons. The first is that it is not uncommon for a home club to pay a portion of the loanee’s wages. Having a player on your roster in MLS but not having to pay 100% of that players wages is immense as it allows you to once again strengthen the total wage bill of your club (and it’s overall roster strength) relative to the rest of the league. Secondly, loan agreements often have purchase options and options are always good. Specifically in MLS, the ability to not bring a player back next season if he’s not working out this season allows you to free up the cap space needed in the following season to find the player’s replacement. In MLS with strict salary cap rules, a bad player on an expensive contract that you can’t get rid of can cripple your team’s overall budget strategy in a way that doesn’t exist in other league’s around the world.
In 2017, Atlanta United acquired 4 players on loan: Josef Martinez, Yamil Asad, Greg Garza, and Anton Walkes. Martinez was a DP whose option was exercised after just 3 games because it turns out he’s Thierry Henry but good. Asad and Garza were paid $150K each by Atlanta, suggesting to many of us that their home clubs footed the bill for the rest. And Anton Walkes was a league minimum $53K charge for Atlanta, suggesting Tottenham paid some portion in addition to this. Atlanta was able to allocate these additional funds to strengthen the squad in other ways. But more importantly, nothing is ever a sure thing. It’s possible all 4 of these guys might’ve been failures and had the deals not been set up as loans, ATL could’ve been heading into 2018 with no roster flexibility (like Orlando City). The roaring success of all 4 players in 2017 has left Atlanta with much better problems to have (which I’ve discussed in other posts).
- Rule: Roll the dice with 3 or 4 high upside loanees with purchase options while if possible having their home clubs subsidize the wages. If 2 are winners, exercise their options and call it a day. The rest go back to their clubs next year and you have cap space to play with. Use wage subsidies on loanees to strengthen other areas of the team, increasing your effective team wages relative to the rest of the league.
5. Monetizing Allocation Order Ranking
OK, this one is just weird. Basically there’s a ranking/priority order for MLS teams chasing USMNT players or other good players that used to play in MLS but who’ve left and want to return to the league. Basically if you want to bring one of these players into the league, everyone in front of you in the ranking order has dibs before you can sign the player. This order resets each season in a worst to first ordering (giving bad teams the first crack at utilizing this mechanism in the offseason) with expansion teams automatically getting the first pick. So a couple features to this thing that are really important. First, it appears to me that the only spot in this ranking that has value is the #1 pick as the #1 pick has right of first refusal whenever there’s a player trying to reenter the league. Second, as the summer transfer window closes (halfway through the MLS season), the market value should start to disappear because if the team in the #1 spot doesn’t use the mechanism it doesn’t get to hold onto it: the order will reset the following year and they’ll likely lose that spot. Third, the timing of when players decide they want to come back to MLS and whether these players meet the needs of MLS teams matters and is somewhat random. Fourth, just from looking at recent transactions and the valuations inherent in them, this thing matters, and clubs place significant value on it. Here are the 2017 allocation order uses and trades:
- Chicago trades GAM (undisclosed) + 1st round pick + 3rd spot for Minnesota’s #2 spot (Juninho)
- Atlanta signs Brad Guzan (free transfer)
- VAN trades $225K + International Slot to Minnesota’s #1 Spot (Freddy Montero loan)
- DC trades $175K + 9th spot in the order for Dynamo’s #1 spot. (Deshorn Brown)
- NE trades $175K + 5th spot in the order for San Jose’s #2 spot.
- NE trades $400K + 2 years of intl slots to CLB for rights to Kriztan Nemeth through CLB’s #1 spot in the order
Just eyeballing it, that looks like basically if a decent player is on the line, we’re talking about the #1 ranking having a trade value somewhere in the range of $300K – $600K in allocation money. Additionally, similar to the principles we discussed earlier around TAM, the type of player you bring in through this mechanism is either a high value TAM player or a DP — my point being if you trade for the #1 pick, you’re trading a bunch of allocation money and then needing to use more allocation money to pay the wages of the player you’ve acquired. While I don’t know for sure, I can’t imagine any team would trade league assets to another league team in order for the rights to then pay a hefty transfer fee to a foreign club for the rights to pay a hefty wage to the incoming player. But, I’m sure this has happened. What’s probably much more common is that teams monitor the allocation list for players whose contracts are expiring. As an example, Atlanta United were able to use their #1 ranking in the allocation order to sign Brad Guzan on a free transfer (i suspect he’s on $700K wages or around there).
The question though is, what’s the best thing a team can do with a high allocation order ranking (what’s our next “Rule”)? It appears to me that if you’re going to exercise your privilege from the top spot of the allocation order, you have to strike it big and you have to find a player who is out of contract (Brad Guzan is a good example). But there are generally, more efficient plays: namely, trade the allocation ranking down to another team who has their hopes set on an available player. Collect allocation money and other assets from that team, thereby necessarily increasing your team’s potential wage bill relative to your competition’s (all at zero actual additional cost). Because the #1 ranking is the only one with real value at any given moment, an ideal string of transactions would be finding yourself at the #1 spot multiple times in a given season, by trading the #1 spot down for the #3 spot let’s say + allocation money. Then after one more team uses their position, you’re back in #1 and ready to fleece the next team for allocation money should a big name be available. All the while, you would have to keep an eye on the clock and realize that your allocation order will not carry over to next season.
So, while Atlanta’s Brad Guzan signing was certainly a success, what Minnesota did was also very interesting and in my mind, clever. They started the season in the #2 spot, but on Dec 23 traded the #2 spot to Chicago for the #3 spot + allocation money (undisclosed) + a 1st round draft pick . Then After Chicago took Juninho and Atlanta took Guzan, Minnesota had the #1 spot and traded it to Vancouver for $225K + a 2017 international slot. So the basic concept is there, so long as you hold teams near the top of the order hostage for the highest possible ranking spots, you can put the league through the windmill so to speak, repeatedly landing yourself back atop the order and demanding more assets to let other teams go after their guys, all the while increasing your league-funded team wages relative to your competition by buying TAM not selling it. There’s some nuanced game theory in there somewhere, but at least as a framework this should be the goal. LAFC, read this paragraph again.
- Rule #4: Trade allocation ranking order down a few spots to collect allocation money, then do it again once your team is back up in the top spot. Remember not to let the summer transfer window close on you in the top spot.
6. Differences between GAM and TAM
In principle, general allocation money and targeted allocation money do the same thing: they allow a team to have a wage bill that exceeds the nominal $3.8M salary budget cap. But there are key differences that should have an impact on front office behavior. First of all, targeted allocation money can be applied only to players who make more than the $480K max budget charge but less than $1M. And importantly, GAM and TAM cannot be combined and applied to a single player’s budget charge. Because of this, if a team is trying to sign a player right around that max budget charge and also comply with the league’s $3.8M budget cap, whether his wages are ultimately above or below the max charge may depend on which allocation money resource is more plentiful for the club. You may want to pay a player $500K instead of $475K if you have enough TAM (but not enough GAM) to reduce his wage low enough to slide under the overall budget cap. In order to increase your club’s league-funded wage efficiency relative to your competition, it may involve paying a player more than his market value, as counter intuitive as that may sound. Sam Steejskal first reported on these sorts of odd incentives.
Secondly, understand that while General Allocation Money is indefinite-lived, Targeted Allocation Money does in fact expire after 4 transfer windows. As an example, TAM issued in 2017 will expire at the end of the 2018 season. This presents interesting and complex scenarios. Take for example a situation where Team A may have TAM that’s about to expire. The value of this expiring TAM is quite low to most teams, but perhaps there’s a team out there (Team B) that is trying to pay a one-time transfer fee before the window shuts to secure a player. Assume also there are other teams with varying common needs of TAM and stocks of TAM. Team A’s goal should be to identify the appropriate trading partner (Team B) who has a need for TAM for the purpose of using it in the very short term (before it expires). Offers from other teams in the league will surely be low-ball in nature because the TAM is about to expire. Team B’s goal should be to find a cut rate deal for TAM given the presence of TAM that is about to expire. If Team B deals with any other team than Team A they’ll likely have to pay more for the same amount of TAM (different vintages). Something to think about. Less of a direct takeaway.
7. International Spots
I’ve mentioned over and over again that when teams are considering trading for a player currently under contract with another MLS team, that they should evaluate whether there are comparable players available on the global market because it makes sense to use TAM towards a fee outbound from MLS rather than trade another MLS team an asset that increases their wages relative to your own for a similar player. In order for this process to work, you need International Spots/slots. Each team starts with 8 but these are freely traded in 1 or 2 season increments. Based on my research, the market value seems to be between $50K and $75K of allocation money, but they’re also acquired by trading other assets like draft picks or players. I’ve also noticed that this market normally clears. Some teams like to have a lot of IS slots and others only use a handful, so teams don’t seem to have trouble acquiring the international slots they need, and I’m yet to see a team really be held over the barrel for one.
Most importantly though, if you can get your international players Green cards after they’ve been around for a year, then you no longer have to use an IS on them. This is a free lunch, and every team should pursue it. As IS spots free up, you can either monetize them or use them to sign players on the much more liquid global player market (compared to the unionized and single entity-contracted MLS player pool)
Example: Atlanta getting Green Cards for Kenwyne Jones, Chris McCann, and Kevin Kratz. Not only does it free up IS spots, but it theoretically increases the intra-MLS trade value of these players slightly.
- Rule: Acquire international spots in order to ensure the ability to compare MLS trade opportunities to global player market. Work international players through the US Customs Office Green Card process to free up international spots and increase player trade value.
This is a good time to mention that I fully realize that the directive to sign comparable internationals instead of trade for MLS players in an effort to maximize your league-funded wages relative to your peers comes at a real cost (not a TAM/GAM asset cost). This is because while trading assets for MLS players is not an efficient use of league assets and cedes inherent competitive advantage, it costs less “real life dollars” to gather information on MLS players than it does to hire scouts and analysts to generate information on players abroad. The costs of setting up a quality scouting and analytics department do not count against the salary cap. They are simply real costs to be incurred by the owner of a club. So one way to think about this is a tradeoff between the following two models:
- Spend more money on scouting and analytics. In doing so, spend allocation money on wages and transfer fees for international players that you otherwise would trade to an MLS team for a comparable league player. In doing so, you increase your team’s league-funded wages relative to your peers, increasing your theoretical advantage.
- Spend less money on scouting and analytics. Instead, give up league assets to other MLS teams in order to acquire league players (the cost of this information is not the real life dollars you would spend on scouting/analytics but instead the ceding of competitive advantage to other MLS clubs).
One of these seems like MLS 3.0, the other MLS 2.0, at best.
8. The limited value of a SuperDraft pick.
I’ve placed a high value on allocation money in all of the above rules/arguments, so I should mention an asset that should be given a much lower priority: SuperDraft picks. Each year players are drafted out of college via the 4 rounds of the MLS SuperDraft. Before the draft there’s a combine where players work out and scrimmage in front of all the teams. Generally speaking, players drafted in the SuperDraft either make the senior minimum wage or the reserve minimum wage, or if higher than that, they are tagged as Generation Adidas players (normally the top prospects) and they are automatically eligible to be placed on the supplemental roster (and therefore not count against the cap). Kevin Minkus at AmericanSoccerAnalysis did a study to understand the value of SuperDraft picks based on their ordering. I’ve included his chart below:
Basically each pick in the first round is expected to contribute fewer and fewer minutes over the first 2 years a player is in the league, with anything outside of the first round being mostly valueless on average. When you consider that a healthy MLS academy is pumping out homegrown players who are competing for the same roster spots, there’s a very real argument that an MLS team should not want to make any pick outside of the first round (anomalous draft classes not withstanding). This makes me thinking that whenever a team needs to trade for a player or an asset, they should first start by offering SuperDraft picks. If you need an international slot, try a SuperDraft pick, what about a nominal amount of GAM or TAM, try a SuperDraft pick. Want to move up a few places in the allocation order? (say from 7 to 5 and then hope 4 teams utilize their rankings allowing you to spend some amount of time in the top spot) Try trading a SuperDraft pick or two.
Something you should not do is trade allocation money for a better SuperDraft pick. I simply do not understand it. As an example New York City FC traded $250K of GAM to Chicago for the rights to draft Jonathan Lewis, who is certainly a prospect with some upside. But I don’t follow why drafting Lewis and hoping he develops into a good player who if he becomes a good player will demand a higher salary is better than spending $250K of GAM (effectively $250K of salary budget) on a player of the $250K caliber. Players who make around $250K include Leandro Gonzalez Pirez, AJ DelaGarza, Steven Beitashour, Drew Moor, Sebastian Lletget. Point is that’s the caliber of player you can have on your team at that wage amount – now acquiring one of those players may cost something, or it may not. Older players like Jeff Larentowicz ($175K) was a free agent around this time.
In contrast, Atlanta United have done a decent job trading SuperDraft picks for assets, including: 2017 #24 pick for 2 seasons worth of international slot, 2020 4th rounder for Kevin Kratz, 2019 fourth rounder for Harrison Heath, 3rd rounder or conditional 2nd for Romario Williams, 2018 2nd rounder for the discovery rights to Greg Garza.
They did trade an expansion drafted player for the #8 pick and turned that into Julian Gressel, which has worked out swimmingly, but I don’t think this sort of move works out very often.
- Rule: Trade your Superdraft picks away for assets you can use to increase your team’s total potential league-funded wages relative to your competition.
9. Homegrown Players
The league (and surely in partnership with USSF) has created special rules around homegrown players that are supposed to create incentives for clubs to invest in youth development. I want to clarify specifically what the incentives accomplish here, because I think there’s some confusion about the way people talk about this. First the rule: basically, if a player qualifies as a homegrown (he’s played in your development system for a year), he isn’t subject to the Superdraft and instead you can sign him to your team as a homegrown player. He will occupy a supplemental or reserve spot on your roster so he won’t count against the cap, so long as he makes $125K or less (they start out making much less: Tyler Adams makes $75K).
So I want to be clear, that the primary benefit of the homegrown player designation is *not* that a homegrown player doesn’t count against your cap. After all, no supplemental or reserve roster spot (21-29) counts against the cap (basically the low earners in MLS). If we play the scenario out where a club successfully develops a star out of their youth system, while he’s still developing in his early years in MLS he’ll be on the supplemental/reserve roster, making $75K or so and not counting against the cap. But if the player truly becomes a star, at some point it will be time to renegotiate a contract and his wage demands will exceed $125K (perhaps at this point there are clubs overseas offering him much more than this). It is at this point that an MLS club can either a) sign him to a fair market value wage, at which point he (like all other good players) counts against the cap and the homegrown player tag goes away, or b) sell him overseas and take the profits from the sale (which is basically the entire fee) after MLS takes its cut (or doesn’t if they change the rules as reported), and convert $650K of this profit into general allocation money to increase the strength of the squad. If you’re still reading at this point, I think you know where I’m going with this. The primary purpose of the homegrown player rule, is not for MLS teams to create homegrown superstars and keep them in MLS (if it was, then the rules would be much more generous to teams who do this – maybe the player’s wages would be exempt from the cap hit regardless of amount). The rule is designed to create an incentive for MLS teams to develop youth players in the area into stars and then sell them overseas. One important note, which I may explore further in another post, is that in order to sell a player oversees for a significant transfer fee you need to resign the player to a long term contract. So the act of turning a non-cap hitting homegrown into a transfer fee may involve a transition period, where the player is briefly making something closer to a fair market value wage before a foreign club comes in for him.
- Rule: Develop homegrown players by stashing them in spots 21-29 on your bench and getting them minutes, and then when they have developed into stars, sell them to generate profits which you can convert into general allocation money to further strengthen your team (increase your team’s league-funded wage bill relative to your competition).
- Alternatively, you can sign a homegrown player out of college who would otherwise have entered the SuperDraft if he has fulfilled the 1 year of development within your academy. This 22-23 year old is likely more ready to see significant minutes in MLS than a 16 year old phenom prospect. Accordingly, there’s a benefit to paying the 22-23 year old an entry-level homegrown wage and have him not count against the cap.
That’s it for now in terms of the “Do”s and “Don’t”s.
I should mention Jared Young at AmericanSoccerAnalysis has a similar full breakdown of Roster Construction here. He comes to some different conclusions about what portions of the roster a club should focus on. It’s an interesting read and a very helpful breakdown of the key rules.
Let me know if you have questions or ideas on where to take this from here. I’ll likely be publishing something like this in chapter form over at DirtySouthSoccer. I’d also like to looks specifically at some of the nuances of how an expansion team can find advantages – with the expansion draft and other types of things.
I also have vague plans to publish some MLS Trade Price Guides as the league becomes more and more transparent with the amounts being traded around.