Nagbe

Here’s a draft of the Nagbe article posted over at DirtySouthSoccer. Posting it here just so I’ve got it here, and also cuz it was just sitting in the draft folder.

By now you know the big news. That Atlanta has struck a deal with Portland Timbers for 27 year old USMNT wide/central midfielder Darlington Nagbe in exchange for $650K of GAM and $300K of TAM in 2018, $100K of GAM in 2019, and $600K of additional allocation money contingent upon Nagbe’s and ATLUTD’s performance during his contract term, and a 2018 international spot.

This is exciting and I have a bunch of questions. This post is going to explore these questions and attempt an objective evaluation of Nagbe as a player, as a fit for ATLUTD, and as a transaction in MLS. Put another way I’m going to try to answer the question: Why Nagbe?

I think the first question on everyone’s mind (especially as the roster continues in a state of flux between the inaugural season and the upcoming 2018 campaign) is: was Nagbe brought in to play from a wide attacking position or from a more central box-to-box role? According to whoscored, Nagbe started 22 matches out wide (16 left), and 7 times from a central midfield spot. From 2013 – 2017, 125 (77%) of his 162 starts have come from wide positions, and 27 (17%) have come from the central midfield role. Also 10 appearances in a #10 role.

Here’s Carlos Bocanegra from the official team site: “Darlington is one of the most dynamic players in the league, and what stands out to me about him is that he compliments our attacking options so well. He has the ability to dribble out of trouble, he has a very unique quality in his ability to skip past a few defenders and drag defenders out of position, which leaves his teammates in great positions one-on-one or with mismatches down the field.”

He continues: “There were a couple guys we considered that we thought could come from within the league and make a difference in our midfield. The others would’ve probably forced Miguel Almirón a little deeper in the middle, and we didn’t want to take him further away from goal. So Darlington fits our lineup perfectly. Whether he’s deployed centrally or on the wing – he will chip in with a few goals and assists but he’s going to be the connector. He had one of the highest possession retention rates in the league, which is perfect for our team and style building out of the back and playing through the lines. He’s the exact piece that we wanted, and we were honestly surprised that he was available. So we’re excited we were able to get him”.

While the “What Darlington Nagbe brings to the 5-Stripes” video is just a compilation of goals he’s scored, I agree with many others who have written about the signing in that I don’t think that’s why they signed him.

By all accounts Nagbe’s strengths are in passing, ball retention, and carrying the ball through lines of defenders in midfield.

Dribbling

I thought I would check some of these conventional wisdoms against the stats and pulled some individual player stats from whoscored.com and started sifting through them. This chart, which includes players with 800 minutes or more and who played primarily in midfield (as broadly defined, think center mids, wide mids and 10s) caught my eye:Dribbles90

Did you find Larentowicz and Carmona? Hint, fly Southwest.

While one might not expect for Larry and Carmona to be taking players on 1v1 from the central midfield areas, I think it’s telling that even compared to other midfielders like Ring and Bradley and Chara, they are on an island all alone called zero. It’s plausible that Tata identified this as an area of improvement for his midfield, the ability to eliminate defenders on the dribble to open up high quality passes into the final third or throughballs in on goal to Martinez and Villalba. There are three Nagbe dots above, his overall average, his average playing wide, and his average playing centrally, where I think we can expect to see him for Atlanta United, and they’re all quite good. While his dribble output is the highest in wide spaces (makes sense), even in a more central role, Nagbe is successfully dribbling by defenders more often than once per game and he’s completing dribbles right around 70% of the time, which is a better rate than player’s like Villalba, Almiron, Schweinsteiger, Blanco, Asad, and Lodeiro. This seems like it could be a positive addition to an Atlanta United midfield that frankly I didn’t see much in the way of weaknesses in 2017.

Passing

By the numbers, Nagbe is a better passer than maybe anyone else in MLS. By now you’ve certainly heard the soundbite about him leading MLS in passing at 92% accuracy. While this is an intuitive data point, a flat pass completion % is often misleading. What if the player only attempts easy passes? Luckily, there are other metrics we can use to take a stab at evaluating passing ability. AmericanSoccerAnalysis.com has developed one such metric, which they call xPassing. By comparing all of a player’s pass attempts against the average success rates for similar pass attempts across the entire league in previous seasons, they develop an “expected passing percentage” for each player based on the passes he’s attempted. If a player’s actual pass accuracy % is greater than the calculated expected passing percentage for the profile of passes he attempts, than he is an above average passer. I took ASA’s data, which is categorized into final third passes, middle third passes, and defensive third passes and dropped them in excel.

To start, I filtered on only players with greater than 700 “middle third passes” and charted their success rates above or below the expected rates on the y axis (at the top of the graph are better passers and at the bottom the worse passers), and on the x axis I’ve plotted the average xPass % (players who on average attempt easier passes are on the left, and more daring passers are on the right):xPassMid

You can see that while Carmona and Larentowicz are above average passers, Nagbe towers above everyone, a true outlier. Also, Carmona is a bit of an outlier in terms of attempting almost exclusively high percentage passes. Nagbe is closer to Carmona than to Larentowicz in terms of passing profile (passes that are historically completed at a higher rate). For grins, check out Asad (lower left) who as we might expect takes huge chances with riskier passes. The models have him coming in lower than one might expect, and I won’t argue with it, except to say you make your own luck. Watching Asad in 2017 was so thrilling because he would try literally anything and when surrounded by goal scorers, this has its benefits – and he saw those benefits with monster assist numbers.

Nagbe pops even more if we look only at passes in the final third. The chart below includes all MLS players with 300+ final third passes.FinalThirdxPass

Again, Nagbe is in a league of his own in terms of passing accuracy in excess of expected pass accuracy based on historical averages for similar passes in the final third. He’s also in the upper tier in terms of choosing less risky passes. So in terms of passing, it is true that whether he’s in the middle third or final third, Nagbe chooses to play exceedingly high percentage passes and he completes those passes even more routinely than they are typically completed. He appears to be a good passer, and probably a better overall passer than a chance creator.

Ball Retention

One thing that not taking on defenders in the central midfield areas gets for you is somewhat higher ball retention rates (Carmona and Jeff high-five each other). If we’re going to have old Darlington dribbling around in midfield, let’s make sure he’s not a turnover machine like the beloved Asad (who fortunately for ATLUTD, turned the ball over further up the field). Charting the sum of “unsuccessful touches” and dispossessions” per 90 minutes from whoscored on the y axis and average number of passes per 90 on the x axis, we get the following for “midfielders”:Turnovers

Upper left are players who turn the ball over at a higher rate per touch, and players lower right care for the ball like a baby bird. So the usual suspects show up on the high turnover end of things, the attacking midfielders and wide players. Of note for our purposes are Asad and Almiron in the 4+ p90 range. Poor Johan Vinegas isn’t even pictured above because I had to cut off the y axis (10.2 turnovers p90!!!). And also of note, Nagbe shows up in the 3-4 range when playing wide, but only the 1-2 p90 range on 56 average passes, when playing centrally. He profiles similar to a Carmona or an Alexander Ring when he plays there, and that’s good. For reference, Larentowicz is at the absolute midfielders’ league floor of 1 per 90. Good old Jeff. Michael Bradley shows up impressively giving the ball away under 2 per 90 despite averaging 77 passes p90. These figures make me feel a little better about having a fancy dribbler guy in midfield.

Chance Creation

Much of the talk of Nagbe’s qualities has focused not on his final third product but more on buildup figures and his unique abilities to move and retain the ball. There’s a reason for this, he only registered 3 goals and 3 assists in 2017 and his underlying xG and xA numbers were even lower at 1.95 and 1.23 respectively (according to @analysisevolved). Most everything points towards his value being in buildup and not in chance creation. Here’s a chart of MLS midfielders’ key passes and shots per 90 minutes (minimum 800 minutes):DarlingtonChanceCreation

To me, this is informative because while Nagbe’s 2017 minutes at central midfielder were limited, he put up key pass / shot volume profiles that were more attacking than the household central midfield names like Bradley, Dax, Alonso, Ring, and also Atlanta’s Carmona and Larentowicz. He basically put up key pass numbers that looked like a decent attacking midfielder but shot volumes that looked like a #6. Schweinsteiger was a good comparable in 2017 in terms of chance creation. It strikes me that this “link up” / “connecting” player we keep hearing about that Nagbe will be in Atlanta… there just aren’t many examples of this type of player in MLS, partly because its such a unique profile. That’s somewhat worrying if only because it’s hard for me to completely visualize how 2018 will look in an average match. But it’s also a reminder that Nagbe is a rare talent — I just can’t think of many “connecting” midfielders in MLS who dribble and pass with ease and play behind the #10. Nagbe’s unique mix of skills is very rare, and so it make sense that you’d have to pay for something this rare. We’ll get to that later.

Quickly on Shot Selection

If there is one area of Nagbe’s game I’m confident he needs to improve, it’s his shot selection. Here are the shots per 90 (“inside the box” on the x axis and “outside the box” on the y) for “midfielders” in 2017:shots

This isn’t completely worrying, but Nagbe doesn’t shoot often compared to other midfielders and when he does it’s from range. These shots are very very rarely high percentage shots. We won’t expect him to contribute very often as a shooter, and it’s not uncommon for a holding midfielder to take a higher percentage of his shots from range, but even glancing below Nagbe in the graphic we can see the other low volume shooters contributing some from inside the box. With so many goal scorers and chance creators playing in front of him in the team, Nagbe will need to pass up the opportunity to have a bite from range and instead feed the ball to the expensive South Americans who create goals.

Chance Buildup

So if Nagbe isn’t a “find the final ball” guy and he’s not a “get on the end of the final ball” guy and he’s not a “shield the back line” guy, I guess he’s the “everything else” guy. AmericanSoccerAnalysis has a metric with which to view a player’s contributions to possessions which end in the creation of a chance. It’s called “xG chain” and it basically assigns value evenly to every action in a sequence leading up to a shot based on the final xG value of the shot. So if Nagbe’s good at linking up plays that ultimately end in good chances, he should still show up with decent xG Chain numbers, even if he’s not involved in the final ball. Similarly “xG chain – buildup” measures the same thing but without considering assigning any values to the final passes or shots. We would expect Nagbe to shine better in this second metric. Anyhow, here are both 2017 xG chain (Y) and xG chain buildups (X) per 96 minutes according to ASA:xGDarlington

Nagbe’s buildup play is on the higher end, in good company at +0.32 in the same ballpark as Kljestan, Victor Vazquez, Mauro Diaz, and Almiron. And unsurprisingly, his overall xG chain isn’t isn’t much higher than his xG chain buildup, suggesting most of his contribution does in fact come in linkup play and not in the final ball. If we’re going to ask him not to creat chances but just to link up midfield and attack, than we’d want him to have a good buildup number, and he does. So that’s good.

Defense

Assessing a player’s defensive value or even defensive contribution using on-ball event data is definitely questionable. Counting-type stats like interceptions and tackles and clearances are mostly descriptive and are almost entirely detached from “value.” A player might tackle more because he’s facing more take-ons, not because he’s a good tackler. That being said, because Nagbe will likely be shifting into a role that he hasn’t played as often in the past, I thought we could take a look at interceptions and tackles, and as long as we keep our “descriptive” goggles on, and don’t get too carried away, maybe it’s worth looking at. Here are tackles and interceptions per 90 minutes for all “midfielders” in 2017:defense90

Remember, the frequency a player tackles or intercepts is often just as much a reflection of how often he is put in the position to make such a tackle as it is a reflection of his ability to break up play. Adjusting these figures for possession would be better, but I don’t know how to do that cleanly. So if we just caveat this to hell and back, what do we see? I’m slightly encouraged by the fact that when Nagbe plays CM he either does (or is asked to do) a similar amount of on-ball defending as Carmona and Asad. None of these guys sniff Larentowicz who appears to be an on-ball defending demi-god of sorts, but at the very least Nagbe is either just as capable of, or has been put in similar situations (albeit in limited appearances) as Carmona and Asad (who is a very high defending wide player). If what many expect to see comes true, and Carmona does indeed drop back into a more 2017-Jeff role, and Nagbe drops into the 2017 Carmona role, it would appear as though he’s not entirely foreign to it (I was surprised to see this honestly).

Also, I should add that Nagbe tackles with efficiency. Pictured below (tackles p90 on the X and tackle success rate on the Y):Tackle

He’s… wow.. he’s very good by this metric. Not sure how much stock to put in this, but it pops visually. Cool.

What I’m most concerned about defensively is Nagbe’s ability to find his spot in the high pressure scheme that Tata employs. From watching the games last year, Carmona very often led the high press by launching forward from central areas to squeeze opponents in possession. He may not have collected all of the tackles and interception stats, but he likely caused many of them by initiating the press and funneling the ball towards pressing traps. I haven’t seen enough of Nagbe to feel confident that this is in his game, nor the awareness in a transition moment to jump start the press but I don’t know for sure. Matt Doyle commented on ET Radio that this was not a strength of Nagbe’s game.

Trade Value

Finally, the tricky question: Was the trade worth it?

There are many ways to answer this and lots of factors to consider. First, let’s just conclude quickly that based on the above charts and what not that Nagbe does in fact carry a unique and perhaps even rare combination of highly valued skills. Those skills do not or perhaps have not translated into final third “end product” in the way that most highly valued soccer skills do.

Second, let’s assume a “highest and best use” proposition that Nagbe will in fact play as a “linking player” in a “#8-type” “box to box” role and that Darren Eales and company identified him to fit into this role. Quotes from the team certainly indicate that all of this is true and his lack of chance creation numbers suggest that perhaps he shouldn’t have been playing out wide. Who knows.

Third, I just want to contextualize this some more before we start talking dollars and cents. When I watched Atlanta United in 2017, I don’t think that at any point in any of the games I said to myself or those around me “I wish Jeff Larentowicz played more like Carlos Carmona in the deepest midfielder role and I wish Carlos Carmona played more like Darlington Nagbe in the box2box role.” We can agree that Jeff and Carlos did not complete 1v1 take-ons the way Nagbe can. We can even agree that the extent to which they did not attempt these duels is perhaps low by central midfield standards. And we can agree that Nagbe has another level to him in terms of ball retention in traffic. But it seemed to “work” last year without him, at least in my eyes. And that’s worth pondering.

That all being said, as long as Larry and Carmona are coming back, and we we agree that we needed to add a central midfielder anyways just for depth reasons, Nagbe isn’t a bad type of player to add (Jeff to the bench). On balance, he would likely improve every single team in MLS right now, so that should count for something. Are Atlanta that special?

Further, the advantage that Atlanta United may have had in 2017 in terms of being able to efficiently create a team’s wage budget from scratch without having to navigate existing chunks of budget already allocated to players (and yes this has its downsides) may be coming to an end as a) LAFC rolls into the league with a presumably huge war chest of expansion allocation money to play with and b) all teams were just handed the option to dip into $2.8M in additional TAM per year. So, to the extent that teams were handicapped in 2017 by their past mistakes (bad contracts), 2018 is going to be a different story in which every. single. team. will have the ability to rebuild and improve their squads. It is in this very context that dealing for Nagbe makes sense — the context that says every single team in the league (except DC United and Columbus) will theoretically improve in terms of roster strength and depth, and so because Atlanta will have to as well, you may as well grab a domestic player who is almost entirely unique in his skill set and in the prime of his career.

What about the price though? $650K in GAM now. $300K in TAM now. $100K in GAM in 2018, $600K in contingent fees if Nagbe and ATLUTD hit certain milestones. First of all, when we saw the news of the $650K in 2018, many of us were worried because this is the exact amount of GAM that the team would generate (by rule) if it sold a player out of MLS at decent a profit – so for a moment there, we thought the Nagbe deal meant either Carmona was being sold, or Almiron or Martinez was being sold. And I’m not going to lie, this initial reaction has colored the way I’ve thought about the trade the whole time. BUT, Darren Eales on ET Radio came out and said that actually the GAM that went northwest in this deal was dry powder from the existing expansion year GAM allocation that the team had been saving just in case a huge opportunity like this one showed up.

And by all accounts, this did *show up* — Portland decided to deal Nagbe and started shopping him, and Atlanta was like “what now? I mean, I’ll have to ask my boss, but like… is this a good number to reach you at? And and can you say which player it is again that you’re looking to move? Yea, let me get a pen, it’s Darlington (how do you spell that) Nagbe and not Liam Ridgewell, right. Yea, ok got it. Well, I’ll see what I can do, money is tight these days but I understand where you’re coming from and we look out for each other right”

Sorry

If you’ve kept up with some of my other posts on the finances of building an MLS roster, you know by now that I DO-NOT-LIKE-TRADING-ALLOCATION-MONEY-FOR-PLAYERS. Simply put, when a team does this, it is trading its ability to increase its wage bill  above other teams…to another team. It is saying “here, we will pay our team less and you can pay your team more, and in exchange we’ll take your player and we’ll have to pay him with what is now less.” So my immediate reaction was that this was a bad trade. A mistake. I’m now fairly neutral on this (though I am definitely excited to see him play), having been persuaded by a few arguments in favor of the deal:

  1. While sending allocation money to your competition isn’t ideal, in this case, the alternative of finding a player of Nagbe’s quality for $1M + add-ons in the international market is difficult (transfermarkt shows a bunch of “comparable players” in the 2M euro range). And finding a player of Nagbe’s quality for less than that who is only making $565K a year in wages is probably impossible. I should add that Nagbe will get a raise when his contract is up – he wanted $1M from Portland, thus the trade shopping. Because of this, his contract is currently a “favorable” one, an “asset” in accounting talk. If by chance his contract has more than one year left on it (and it appears that this might be the case), than this might in fact be a slam dunk of a trade. A player worthy of $1M making half of that for 2 years running starts to pay for the $1M fee VERY quickly. Now, who knows what Atlanta will do and when in terms of extending his deal and giving him the money he wants, but this seems pretty favorable. Further, paying GAM for a player but using TAM to pay down his wage to the max (and potentially further to free up budget space for other players) isn’t a terrible combination. I’d be more worried about sending a boatload of TAM away to then turn around and use more TAM to keep a player’s wages compliant with the rules.
  2. With all of the new money flowing into the league being TAM (and the rule being that you can’t use TAM and GAM on the same player), the fact that only $300K of this deal is TAM is a positive development. It would appear that the club hasn’t even dipped into the discretionary TAM available, and that this deal won’t hamper the club’s further spending. If it’s true that Nagbe in and $650K of GAM out doesn’t mean another player is headed out (and that the GAM was saved from 2017), that’s good.
  3. Something, Something International Spots? I’m honestly confused about international spots in the new MLS. It would appear that high-end domestic players have suddenly become unicorns with higher valuations than before. And I’m not totally sure why. Perhaps it’s the fact that $64M of additional discretionary MLS fees/wages has just been approved for clubs to chase after high earning players (players that are often internationals) but without an increase in the number of international slots in the league (aside from the 8 new ones LAFC carries in). Perhaps, Atlanta is transitioning into a future state where a team cannot count on the market for international spots magically clearing every year at a relatively nominal cost. For instance, if Atlanta continued to roll into every season with 9 or 10 international players, perhaps teams would start to ransom them in a way that hurts, or perhaps the USSF presidency being up for grabs has spooked MLS into wondering if new constraints on international players are coming. Who knows. That all being said, Atlanta a) is good at converting internationals into domestics after a year of residency and b) if international spots are suddenly more valuable, why are Atlanta United trading all of theirs away? Watch this space I guess.
  4. It has been reported but not confirmed that the $600K of incentives in the total transfer fee for Nagbe are the type of incentives that are hard to hit, meaning it’s very possible the fee is just the $1M. Incentives around Nagbe scoring a bunch of goals or assists when he’s going to be dropped back into midfield and doesn’t have a history of creating these anyways, are a stretch. And Nagbe winning league MVP or Atlanta United winning the league are the types of things that are both a) unlikely, and b) if they were to occur, I would suddenly not give a damn what the fee was.

I’m ready for Nagbe to be successful in Atlanta and I will 100% be rooting for this to be a successful move on ATLUTD’s part. I still have some concerns, but ultimately after reviewing all this stuff, I don’t think there’s so much downside in this to where there’s a huge negative tail risk. If it doesn’t work out and he doesn’t fit the system, the club have given up some of the initial expansion GAM and not much else. Tata can always revert back to a Larry/Carmona midfield partnership, and who knows if Nagbe were to leave in a year or two perhaps there’s a transfer fee coming Atlanta’s way. If it works out well and Atlanta continue to improve the squad with some of the rumored international players they’ve been linked to (or they bring back Yamil Asad), I could see a very high ceiling for the team.

 

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Squad Construction & Competitive Edges in MLS Roster Rules: A Manual

“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 dependWelcome 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

  1. Introduction to Framework
  2. Allocation Money as Increased Budget (not as tradable asset)
  3. Designated Players and Young DP Savings
  4. The Option Value of Loans and Subsidized Wages
  5. Monetizing Allocation Order Ranking
  6. Differences between GAM and TAM
  7. International Slots & Investing in Scouting/Analytics
  8. Limited value of SuperDraft picks
  9. 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:

Dashboard 1

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):

League-funded Wages
This chart has the non-DP wages plus the DP and young DP roster charges (but not the DP wages in excess of the budget charges, which the individual club owners fund). The first black line approximates the nominal MLS Salary cap and the second line is a proxy for the cap plus an average year’s worth of distributed allocation money.

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)

  1. 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).
  2. 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.

DP Wages
Someone will probably call out Montreal. For whatever reason Piatti still shows up in the Players Union Salary releases as making $450K (under the DP threshold). I don’t think this is true, but the data is the data.
  • 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:

  1. 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.
  2. 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:

SuperDraftMinutes
Kevin Minkus at AmericanSoccerAnalysis pulled together this helpful chart looking at empirical success rates as measured by minutes contribution across the 4 rounds of the draft.

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.

 

Atlanta United & MLS Roster Rules: 2018 Salary Cap Scenarios

Just a quick jump post over to DirtySouthSoccer where I wrote a piece about the MLS roster rules and the salary cap, looking ahead to 2018 and wondering what sort of options the front office has to retain the squad as currently assembled. If you like spreadsheets, give it a read, but maybe make a pot of coffee first.

I try to guess at GAM and TAM balances as initially allocated to the expansion clubs plus I guess at undisclosed traded amounts and unconfirmed rumors of future money injections by the league. In the end, if you want to help think through whether the club can sign Garza and/or Asad next year, you’ll need to read most of it.

2018 Roster Panic Part 2: Lost in Spreadsheets

The Economics of GAM and TAM

Trying to figure out how General Allocation Money and Targeted Allocation Money work in Major League Soccer has been an adventure for me.

MLS Salary Budget Rules Overview – skip it if you know it

MLS is a single entity owned jointly by its members – who are owners of the teams competing in the league. All the owners agree (and jointly with the MLS players union) on how much is going to be spent on players in a given season, and then the league sets the rules around roster construction and provides all the teams a specific amount of money to spend based on these rules. There are specifics and then crazy specifics, but as a general rule, it works like this: Each MLS team is made up of 28-29 players, the wages for 20 of which (the senior roster) are governed by the Salary Cap. Each of these 20 players will carry a salary cap charge between the senior minimum ($65K) and the maximum budget charge ($480K), for a total of $3.8M in salary budget. In order for a team to sign a player making more than $480K (or to sign a player by paying a fee + wages greater than $480K), while still making use of these shared League funds (i.e. not opening up the individual team owner’s pocket book), it has to use up some of its “Allocation Money” (also handed out by the League to each of its member teams based on #rules), which comes in two forms: General Allocation Money and Targeted Allocation Money.

General Allocation Money (each team receives $200K of each year +/- amounts triggered by a variety of achievements and/or other events) does not expire and generally doesn’t have any additional restrictions with it. You use it to bring your roster in line with the salary budget when it exceeds it, either for an individual player charge, or more generally for the team’s total budget.

Targeted Allocation Money is like GAM except it can only be used for players making between $480K and $1M, and it is given out in tranches (agreed to on an ad hoc basis by the league, it would seem ) which each expire after 2 transfer windows. A summary of the recent TAM injections are as follows:

  • 2015 – $500K per club
  • 2016 – $800K per club (expires at the end of 2017 season)
  • 2017 – $1.2M per club (expires at the end of 2018 season)

GAM and TAM are tradeable between MLS teams, and GAM and TAM cannot be combined together to pay down any player’s contract or transfer fee.

Importantly, if a team wants to sign a player above the max budget charge of $480K AND it doesn’t want to (or can’t) spend allocation money (GAM or TAM) to “buy the budget charge down to $480K, it can pay for the salary (or transfer fee) in excess of $480K out of its owner’s own pockets (for up to 3 players) and the player’s budget charge would remain the max of $480K. Such players are known as Designated Players. And the budget charge for a designated player can be less than $480K if a player is 23 years of age or younger.

Other Background Reading on the topic from some immortals: Doyle, Stejskal, and I will add some more here.

Edited to add: Somehow I missed linking to Jared Young’s comprehensive CAP review at AmericanSoccerAnalysis, here.

Some Takeaways

So, it’s important to point out that a team does not have to sign any designated players. They can play with “League money” only — let’s call it $5.2M ($3.8M budget + $1.4M in estimated annual allocation money). In fact, 1 of those 3 potential designated player slots costs a team that uses it $150K, which is paid to the League, and then distributed as additional GAM to all teams who do not use up all 3 designated player slots. But most importantly, in light of all of this, if a team does not “use” its allocation money, it should consider it a real economic cost, since it is already paid for. Use it or lose it. Alternatively, it can trade away its allocation monies, potentially operating on a senior roster of wages totalling as low as $3.8M. But my important takeaway from all that is that anything within the $5.2M umbrella is all “MLS Money.” There’s no way to exchange it for outside dollars, and it’s already been paid for (by the league, or by each member contributing the required annual amounts to the league, or however they settle it). To some extent it is a sunk cost. Anything above that $5.2M threshold – the DP money – is real money, real incremental dollars – real economic decisions to be made by a rational club owner.

And given that it’s included in the “MLS money” umbrella, and not in the “outside money” (or “real money”) bucket, GAM and TAM are endlessly interesting to me. I want to explore the question: what is the best (most efficient?) way for an MLS club to use GAM and TAM? As a reminder/checkpoint, here’s what you can do with GAM and TAM.

  • Trade it to another club in exchange for things such as Players, other allocation moneys, International Spots, Draft Picks, Allocation/Waiver Priority.
    • As an example, Orlando City could trade $400K of General Allocation Money and $500K of Targeted Allocation Money to Sporting Kansas City in exchange for the rights to Dom Dwyer’s contract ($680K/year salary with 1-2 years left).
  • “Buy down” a salary budget charge for a DP to below the max charge (and to no lower than $150K)
    • As an example, Atlanta United could sign Chris McCann for $570K and spend $90K of TAM to buy McCann’s budget charge down to $480K (keeping the DP tag off of him).
  • “Buy down” a salary budget charge to no less than half the original charge
  • “Buy down” a transfer fee or loan fee so that it does not count towards your salary budget (either at an individual level or a team level.
    • As an example a team could pay a $500K transfer fee to foreign club for a player on $400K/year in wages. The team could spend $500K in TAM or GAM to eliminate the transfer fee from being included in the team’s salary budget.

Fiat Money

It’s important to point out that for the purposes of understanding how GAM and TAM function in MLS, both types of asset are what’s known as “fiat currency” — currency whose value is backed solely by the entity that issues it. In other words it is Monopoly money. It is both created and destroyed by MLS. It has value to MLS teams because MLS is the league they compete in and it is used to subsidize MLS salary caps. Under no circumstances could TAM or GAM be sent to a team outside of MLS; they simply would not accept it. It doesn’t exist. When MLS creates new TAM, it simply decrees that TAM has been created and it can destroy it as well.

Since TAM and GAM are fiat, it is also true that in only 1 of the above 4 uses of allocation money, does the allocation money survive the transaction (if it is traded). If it is spent buying down salary budget charges or buying down a transfer fee, it disappears into the ether, decreasing the overall aggregate supply of allocation money in the league. Allocation money can exchange hands in MLS, but its final resting place — its ultimate purpose is to be destroyed/spent in exchange for a given MLS team being granted the ability to invest slightly more into its senior roster than otherwise is permitted. Further, TAM will even die of old age if it is not destroyed within 4 transfer windows (a 2 year shelf life).

With this in mind, I have a hunch about how allocation money is best used, and how it’s not. Let’s do some accounting homework.

Scenario Analysis

MLS Team A needs a striker, and they’re considering two potential options.

Option A:  Striker John Doe, 26 years old from the Championship in England. He can be signed by paying his current club a $1.6M transfer fee and he wants a contract worth $400K per year. To comply with MLS roster rules and not make John a designated player (i.e. not spend any outside “real money” but just “MLS money”), MLS Team A would need to spend (send to MLS HQ) $1.6M in allocation money to eliminate the transfer fee from the budget, so they can sign him and slot his $400K of wages into the $5.2M-ish MLS budget.

Option B: Striker Dom Doe, 26 years old and currently on MLS Team B’s roster. He can be traded for by paying his club $400K of GAM, $1.2M of TAM and he’s on a contract worth $400K per year. MLS Team A would need to send $1.6M of allocation money to MLS Team B, and then Dom Joe would fit into MLS Team A’s senior roster budget just fine ($400K is below the maximum MLS salary budget charge).

Assuming MLS Team A has enough cap room and allocation money to execute either option and assuming John Doe and Dom Doe are of equal talent, health, work ethic, and potential, and that both qualify as international players under MLS rules, which transaction (Option A or Option B) should MLS Team A go through with?

In my mind, the answer is clear, but this might be a controversial opinion, I’m not sure. Under both scenarios, Team A gains the striker, loses $400K of cap space, loses $1.6M of allocation money, and loses 1 free international slot. But if Team A trades for the striker with Team B, they transfer “MLS money” (fiat assets) to a competitor plus the competitor gains $400K of cap room to replace the striker), whereas if Team A buys the striker from England, Team A *uses* the MLS money– they use it up. It is destroyed. It returns to the earth from whence it came, and no other MLS teams can use it to improve their squad. See the difference? Allocation Money’s ultimate use is to be torn up into shreds in exchange for allowing a club to field a more competitive side by increasing the total wage bill without breaking the salary budget rules. You can either *just do it* and sign a player, and comply with the rules by using GAM/TAM to lower your charges, or you can transfer said GAM/TAM to an opponent in order to get your player, and that other team will replace him with A) the salary budget room they just added in his absence + B) the new allocation money which can allow them to pay his replacement even more!

So, why would Team A ever trade MLS Money to another MLS team to acquire the other team’s striker (if the global football market surely provides a supply of similar players that this hypothetical assumes) and if in doing so, they benefit the other team? I can think of one scenario that makes sense, and that’s when the other MLS team has locked up a favorable contract with said player (because MLS is a single entity, contracts do not get ripped up upon trades between its member teams). So if Dom Doe deserves to be paid $650K but he’s making $400K with MLS Team B, and since MLS is a single entity and contracts transfer between teams, MLS Team A might be willing to “pay” for the favorable contract (to get a guy worth $650K but only pay him $400K, and only take a $400K budget charge). Since MLS Team B will be shipping out a player worthy of $650K/year but is only taking a $400K budget charge, they may only be willing to part with the player if they are compensated for the fact that they will have to replace the player worthy of $650K with a player to be paid $400K (to continue compliance with MLS roster rules). So what would the value of this contract be? What might the two teams agree to as a fee? Maybe its $250K multiplied by the remaining years on the contract, maybe its $300K per year (a little extra for the hastle?).

But again, instead of doing this whole thing, can’t Team A simply sign a player from overseas who makes $650K and buy down $250K of the contract with allocation money if they need to fit him into a $400K budget hole? The result seems similar. I suppose it comes down to valuations. If you value the contract higher than the $300K they’re asking for, you do it.

In the end, MLS is unique from other American sports where trading is more frequent. In those sports , virtually the full labor market for a given sport exists under one collective bargaining agreement, and all the players you would want to sign player for teams in your league, your competitors. In MLS, you can sign a player from anywhere in the world, so there is no need to grease the wheels of other MLS teams to acquire their contracts when you can go out and sign your own. The supply of players is nearly infinite but the supply of GAM/TAM is … not, at least not yet?

OK, just going to publish this now. Let me know your thoughts please. I’m 100% certain I got some big stuff wrong in here, but how else will we figure this stuff out, except by trying.

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Late Edit after some feedback on Twitter:

Some things that have been pointed out are:

  1. To assume you’ve got an endless supply of replacement players in the global market, you have to account for the real world cost (real $ not MLS $) of hiring scouts, more of them, and better ones, and analytics departments and all sorts of other things that cost real money. Inherent in this is the admission that a player you are familiar with (by way of seeing him in MLS and knowing he can produce at this level) is more valuable than a mystery player. So the tradeoff is basically, you can spend more real world money in order to close that information gap (of a foreign playe relative to an existing MLS player) and hope to maximize your cap room / wage bill relative to the rest of the league’s wages, or you can save the real world money (don’t use it on scouting etc) and use the MLS money (by trading it) to acquire the player you have more info on.
  2. On that point, it has been suggested that a better way to phrase the argument is that by trading GAM/TAM to another MLS team you are actively shrinking your team’s wage bill relative to the wage bill of the rest of the league (all else equal, like say if you take DPs out of it, or assume everyone spends big on DPs).
  3. It was brought up that allocation money is perhaps *more* valuable for lower spending teams who do not plan to spend on DPs, which could create some interesting value disparities and therefore trade opportunities when it’s a big spender dealing with a low spender.