A Selling League? How MLS's Arcane Transfer Model Makes Selling Players Unsustainable
By: Noah Sobel-Pressman*
In most leagues, if you want a new player, the process to acquire them is pretty simple: two clubs come together and negotiate a price for the player's contract. This price could include cash, or the contract of a second player. While this isn't a perfect explanation of the generally-understood transfer model, the basic dynamics are there: ultimately, transfer negotiations tend to come down to three principal actors--the selling team, the purchasing team, and the player.
In Major League Soccer (MLS), however, the process works completely differently--in a way that frequently ends up harming the league. For example, players like Joevin Jones end up leaving on a free transfer because, as we'll discuss, it isn’t worth it to their clubs to sell them. And, even when the finances work out and an MLS side does decide to sell, they are only allowed to add up to $650,000 to their salary budget (which is less than the yearly salary for many top players) regardless of the amount of the transfer.
The best way to explain this bizarre environment is through examples of how silly things can get:
For example, this offseason there were several rumored, or maybe actual, transfers. Cyle Larin was maybe signed by Besiktas. Kellyn Acosta was linked to multiple European clubs. Kemar Lawrence wanted to go to the Championship, but he was held back by work permit issues due to Jamaica’s low FIFA ranking. Finally, Miguel Almiron to A.C. Milan or other European teams for a large fee. Whether there were concrete offers on the table isn't really the issue--what would have happened if they had been sold?
The crucial thing to understand about MLS transfers is that, in almost every circumstance when a player is sold MLS itself gets a cut of the transaction because of the organization's single entity structure. Now, there are several different categories that determine how much compensation goes to MLS and how much goes to the club, all of which are summed up in an impenetrable 32-page document. So, not only are teams only allowed to spend up to $650,000 as General Allocation Money (GAM) (which is part of the salary budget) after a transfer, they have to send a proportion of the revenue to the league. The money left after MLS takes its cut and the team invests the maximum $650k into GAM (salary) still belongs to the club; however, MLS limits the way this leftover money can be spent. Money left over from the sale of a player can only be invested in purchasing new Designated Players, expanding stadiums or training facilities, or other things like youth development. Again, fundamentally: it cannot be used as as allocation money, meaning salary for current or future players. This system complicates the process and ultimately harms MLS's hopes of becoming a world-relevant league, because it may not be worth it for a team to sell a player. For whatever reason, MLS has decided to make it very, very tough to sustainably sell players.
Editor's Note:The notion of turning MLS into a "selling" league is, in my opinion, one of the most interesting (and, arguably, fastest) ways to make the league relevant internationally while increasing the level of play. The selling model is also very profitable (not just sustainable) when executed correctly--as perennial sellers and Eredivisie champions Ajax have shown. -GL
Let's examine several types of transfers to get a more complete understanding of how the MLS's complicated model impacts its teams:
The simplest transfer involves a player like Kemar Lawrence who is not a Homegrown Player**, a Generation adidas Player***, or a draft pick. The club just receives two-thirds of the transfer fee. So, hypothetically, if a club offered $3 million for him, MLS would receive $1 million, while the New York Red Bulls would receive $2 million. However, only $650,000 could be invested into Lawrence’s replacement. The remaining $1.35 million could only be invested in purchasing new Designated Players and other things like youth development and training facilities.
A Designated Player is similar to a player like Kemar Lawrence but with one caveat. The club gets to recoup all of its out-of-pocket expenses. In Miguel Almiron’s case, Atlanta spent a rumored $9 million to bring him to Atlanta. If a club came in and offered $20-$25 million, Atlanta would get $9 million plus two-thirds of the remaining $11-$16 million transfer fee. That would work out to $16-$20 million for Atlanta United and $4-$5 million for MLS. So, in order to find Miguel Almiron’s replacement, they would have $650,000 GAM and a designated player spot to replace him. Losing that much money to MLS, and not being able to find a replacement of equal value, might illustrate why Atlanta United hasn’t sold him yet.
Kellyn Acosta has been a member of FC Dallas since 2009, starting with the youth academy. In 2012, he signed a professional deal with them as a homegrown player. He still carries that clarification today. Therefore, if FC Dallas were to sell him this offseason for $4 million, they would get three-quarters, $3 million, and the remaining $1 million would go to MLS. With only $650,000 additional GAM, how would they be able to replace him?
The final transfer option covers both Generation adidas players and Superdraft picks. Cyle Larin is a generation adidas player out of UConn, with three years of MLS service time. These transfers depend on the amount of service time. If they play one year, their club receives 1/3. Two years, 1/2. Finally, if they player three years, the club receives 2/3 of the fee. So, if he world sold to Besiktas for $3 million, Orlando would receive two-thirds of the transfer fee, $2 million and the other $1 million would go to MLS.
Many people have advocated for changing these complicated rules. By switching to a system like the rest of the world, while becoming a selling league, MLS can continue to grow as a league while improving its teams finances and the overall level of play.
* Noah is a staff writer for Hudson River Blue (focusing on NYCFC) and Stars and Stripes FC. He is currently working towards his BA in Business Management and Chinese (Mandarin) at the University of Connecticut.
** A player who has come through a MLS academy and signed a professional contract with that team or a player who came through a MLS academy whose homegrown rights were traded to another team.
*** Players who enter the Superdraft due to their amazing performance as college underclassmen or youth national team players.