MLS Announces Youth Designated Player Initiative

Fabian Castillo, Future Youth Designated Player?

On Tuesday, Major League Soccer announced that they will be making a change in the Designated Player Rules for the 2012 season. The rules will be augmented to allow overseas players under the age of 23 to sign as Designated Players with a reduced cap hit to the team. For those who are under 20, the cap figure will be only $150,000, while those from 21-23 years of age will count at $200,000 against the team’s cap number.

So, why was this necessary? The easy answer would be that the league sees this as one way to improve the product. It’s difficult to sign quality foreign-based youngsters because MLS has to compete with deep-pocketed European leagues. It’s not particularly wise to eat up a significant part of the salary cap with a player that may never come good on their promise. For top collegiate and Under-20 domestic (US & Canada) products, the Generation Adidas program helps MLS teams to cope with this reality, with those players not counting against the Senior Roster salary cap. That program does not allow for international youth signings, though.

Let’s dig a little deeper, and apply some recent news. Robbie Keane recently signed with Los Angeles as an expensive older DP. The league just spent a  $3 million transfer fee on a guy who struggled to find playing time when he was loaned to the worst team in the Premier League, West Ham United. Keane did play well for Ireland over the summer, so there’s little reason to think he won’t work out for the Galaxy. But what if he doesn’t work out? That’s a large sum for the league to spend, and at what real return? Compare that to David Beckham, signed on a free but who garners a $6+million salary. In Beckham’s case, he has a buzz-worthy name in the sports world. In theory he draws fans to the stadium and to the television. Does Robbie Keane fall in that same category?

OK, let’s go deeper still. Jozy Altidore earned approximately $10 million for the New York Red Bulls and Major League Soccer when he signed with Villarreal of La Liga. Young players have a much better chance of returning the investment of both the team and MLS. So instead of spending a load of cash for an aging player whose fee is unlikely to be recouped, perhaps a team could spend $100,000 of transfer funds to get a very good young prospect. If the player does pan out, a big transfer market payday may be in the cards for MLS.

A final thought: image. There are many smaller-budget teams who have yet to sign a designated player. To me, there seems to be a stigma surrounding the “haves” and “have-nots.” The title “Designated Player” is as much a marketing tool as a salary designation at this point. This gives teams the ability to sign Under-23 players as Designated Players at a lower salary than a standard DP. More teams should then gain a chance to break into the realm of the DP without breaking their modest budget.

MLS is obviously keen on this plan, because they’ve added another catch: if you sign a youngster as your 3rd DP, you will not be charged the $250,000 luxury tax.

What will the overall impact be to the league? As seems to be the tradition in the league, I believe most teams will approach this timidly. As with the general DP rule, big-money teams will benefit the most, because they have the funds to absorb the extra charge. Primarily, I see this measure giving teams an incentive to invest in players who will create future excitement, and revenue, for the league. The timing of this announcement with the Keane transfer is interesting, but I’m sure this took a lot of thought and financial modeling to decide that this would be likely to succeed. All in all, I hope that we look back in a few years, and see this  as a significant step in the development of the MLS labor model, and that it provides the league with more talent, and ultimately more fans.

30 thoughts on “MLS Announces Youth Designated Player Initiative”

  1. Earl- It’s interesting you bring up the point on a younger DP’s re-sale value, as I think that is really what would “spread the wealth” amongst DPs in all the MLS markets. The transfer fee is still the one revenue generating opportunity MLS has avoided; I can count on 3 or 4 hands the number of players who have been sold on to other clubs for a fee, so we’re talking an average of 1-1.5 players a season since the beginning. What will be interesting over the next few years is to see if while NY and LA keep their ‘brand name’ DPs, other clubs start picking U-20 and U-23 internationals and each team starts selling 1-2 players a season for a transfer fee. If those other 16 (soon 17) teams see the value in this, if the fees start to go up for MLS players, you could definitely be looking at calls for a liberalization of the transfer policy come the next CBA from the owner’s/Front Offices’ point of view. The league itself could come off being seen as an annoying middleman, having first refusal over sales because they own the contract, and ultimately have a differing agenda than the Front Offices of their franchises, and taking 1/3 of a transfer fee for simply existing. The league may allow it so as to get more $$, but it would have to have an involvement in scouting, contract negotiations, something along those lines to justify it’s cut, otherwise teams/FOs will feel they are doing all the legwork so others can profit. The all-for-one, one-for-all mentality was a smart way to get MLS off the ground, but as each team works its way into the more global game and its marketplace, I think many will want to start declaring independence. The next few years will be very interesting to watch.

      1. It’s not stooping, it’s good business sense. MLS and its teams have always been about, bottom line, making money, which isn’t objectionable. The league has looked at all its options on how to make a profit, which is why you’ve seen the increase in soccer stadia, in good decisions in market expansion, while keeping costs of players and other expenses in check. One thing MLS has not capitalized on though is selling on its players, which every league outside the Big 5 in Europe has to do in order to make money (in some cases, it’s the only way some clubs make money). As I said, the league owning player contracts in the beginning was for basic survival, but as we enter a new age where more teams are profitable or on the verge of profitability, they have to look ahead to see what will take them to the next level. There will clearly be an investment in youth, which is admirable and good for the league. The paradox is, if the quality gets better, in the individual players and the league teams as a whole, the more demand will come from outside leagues with more money to spend & power (ability to play in top leagues, Champion’s League, etc.) to woo players away from MLS. But the league has not been very good in the transfer department, and they see players that they helped development leave out of contract and head abroad, and have nothing to show for it.

        From what the league has said about the new rule, it comes off sounding like “this way everyone can have that new DP toy that the big boys have,” but you know a couple of front offices are salivating over an opportunity to bring in a young quality player to the league, and potentially get a re-sale transfer value that guys like Beckham, Henry and Robbie Keane will never get. For some of the smaller markets, like Columbus, why would it be such an issue if they developed or gave him his first-team chance to sell him on for, let’s say he’s really good, $15M, which could to funding a lot of activities for Columbus (whether it’s a pay increase for some players to keep them here, more investment in youth infrastructure)? If you see this pattern, then what I stated above would be the likely outcome. If handled right, this could lead to tremendous progress, not stooping to a new low.

        1. It is stooping.

          I was giving my friend, who is a Newcastle fan, grief, who are they going to sell to line the owners pockets, while you watch a mediocre team….he tried to argue with my trolling comment…sure enough less than a week later they are selling their top scorer.

          It is exactly what you DON’T want to have happen to your team.
          I guess NY did well though with all the Altidore money…..the owners I mean, of course.

          1. Interesting comment coming from you Charles. By your logic, if you don’t want players from MLS to be sold on so owners can “line their pockets,” all MLS players must stay in the league, which means to keep it that way, you’d have to a) raise the salary cap, or do away with it altogether, 2) increase the number of roster spots, 3) start forceably retiring players at 22-24 or d) only play American and Canadian players, no foreigners. Let’s assume you take 1 or 2, then the consequences are: financial instability (obvious) and the staggering of youth development. If all those US players that are riding the bench in Europe came back to MLS, they take the spots of the young 19 and 20 year olds trying to break into the first team and get pro experience. Those 19 year olds end up on the bench, and, besides a few Reserve games, where do they get experience? D2 and D3 soccer in the US is very unstable, so then they may just take the hit and go abroad, playing the German 4th division, or Swedish 2nd division, where they wallow in obscurity. There are only 18 teams x 30 roster spots/team = 540 total spots in MLS. Believe it or not, it’s actually healthy for players to move on from MLS so spots to younger players become available. Look at DC United from last year to this year. Last year: a bunch of 30 something veterans, worst team in MLS history, only bright spot 2 academy players. This year: got rid of 30 somethings, used academy and draft, and luck (Charlie Davies allocation) built around youth, competition for spots = much better team, possibly a playoff team. Next year – dangerous. So if it’s good for players to move on from MLS, doesn’t it make sense that the teams in the league could benefit getting something in return for developing the player or giving the player his first team due?

            I think you assume that if what I’ve suggested actually happens, the salary cap will go away, which I never said and will likely not go away. Teams still have to operate within their means. That means situations where teams have to sell on to pay down debt or just to break even won’t happen. Re Newcastle, Mike Ashley is just one incredibly stupid, greedy owner. For every Mike Ashley though, there are plenty of other soccer owners in the world who use the transfer market to their advantage. You can’t use Mike Ashley as a reason to not let MLS raise its profile and profit, which improves the league and the national team.

            Let’s also not forget MLS owners already line their pockets with money from SUM properties (US and Mexico NTs, pre-season friendlies, Gold Cup, etc.). They could spend a LOT more on MLS if they wanted with that money. If we assume $100 a ticket for Barcelona-ManUtd in DC, 82k people = $8.2M, or ~3 MLS teams entire salary cap. How many World Football Challenge games were there again?

            Think about that.

          2. And MLS owner’s DON’T line their pockets… See under: SUM.

            Think about this: 82,000 at Barcelona-ManUtd in DC. Avg $100 a ticket = $8.2M, or ~3 MLS teams entire salary cap. How many World Football Challenge games were there?

            Then add US and Mexico NT matches, Gold Cup and MLS into that – owners could spend A LOT more on MLS than they are now and still be ok financially. Line your pockets to put out a mediocre product? That sounds familiar….

            There is a longer reply explaining my rationale, but taking a while to load.

          3. Exactly, so we are on the same page, we don’t want players being sold, we want to watch them play soccer.
            And the friendlies are garbage to be avoided, let the casual fan, front-running Euro idiots go to them.

            I could have sworn we were on opposite sides at the beginning of this conversation. Good to know I was wrong about that…and right about stooping to be a feeder league.

          4. And you’re not even including the massive profits that SUM makes off the TV rights for US and Mexico MNT. Hundreds of millions (why did our USSF hand over control over those television properties to a third party? good question). But that money doesn’t go toward player purchases. I fully support containing costs in MLS. I’d much prefer the league to operate as a equal partner agreement (as in the NFL) instead of a hard single entity, but I fully support a salary cap. But the MLS artificially reduces the money that should be available for that cap by hiding most of their revenue through SUM. It’s a crock.

  2. i totally agree with robert. though i have to say this is a step in the right direction. i like this rule and i like the fact that its focused on younger players. however i find a flaw in the rule. not a flaw but rather a missed opportunity. what they should have done is add another DP slot dedicated to players 23 years or younger for a total of 4 dps. 2 dp slots, a optional third dp and a dedicated young dp. i like the rule, i just dont like how it was applied. but theres hope, theres still alot of time for mls to re adjust from here till the start of next season.

    i find it dumb that people keep complaining that the rich get richer and the strong get stronger. sucks for you. MLS shouldnt promoted laziness and mediocrity by putting all the teams on the same level, MLS should promote competition and invention and reward hard work. profit sharing and playoffs doesnt allow for a huge gap to develop.

    back to the rule like i said its a step, a small one but a step. if it allows clubs to be more thrifty and smart with their options and allow for alittle more leg room and autonomy then that is good for increasing competiton and quality. i still hope one day MLS can just have full on free agency and team signed players instead of league signed players. i dont think we’re that far from it however its MLS’ ball. i think once club values grow with stadiums, player signings and tv deals the need for league owned teams and the stupid training wheels will be no more.

    1. MLS Central Planning strikes again. Soccer is not baseball where one player can carry a team. Soccer is not basket ball where 2 people can win a championship. Etc. Having 3 quality players and 8 other scrubs does not improve the product.

      1. Baseball 1 player can carry a team, but it takes two in basketball ?

        Man, I thought you knew nothing about soccer. Good to know you are at least you are a three sport guy.

        1. Charles,

          Yes, you only need two for basketball. Center and shooter. Center to rebound and shooter to well… you get the picture. This comes from an article on how the mob used two players to run a point shaving system. You bribe the best re-bounder and best shooter.

    2. @Alex

      What is the benefit of full on free agency?

      And what difference does it make who (league/team) holds the player contract?

      1. well there are financial and play-wise benefits to free agency and team controlled contracts. first off players dont like to come play in MLS because of how the league opereates in terms of contracts and negotiations. players rather want to talk to individual clubs, rather than the league. i like what bradjmoore48 said about how the league is basically a middleman when it comes to negotiating contracts for players. he basically explains why the “all for one and one for all” mentality doesnt work anymore. if you want look at his first comment.

        plus it spurs more competition. MLS is basically one whole product rather than 18 soon to be 19 seperate distinct products and that effects how fans percieve soccer here, how foreign players precieve soccer and effects how fans react to mls; do i really want to watch la galaxy vs portland timbers and then basically watch the same teams play in new york vs kansas city? the only thing that distincts teams are basically dps, team names and fans.

        in having teams become more autonomous may take away alittle bit of parity but in the end it allows teams to truely compete and put distinct products on the field.

      2. Having a league-negotiated contract artificially reduces your bargaining power as a free agent. If I want to play soccer in the US, I have to play for MLS. But instead of being able to play various MLS teams against each other in negotiations, I have to negotiate with the league. They offer me a deal and I can take it or leave it. No other industry in the United States works that way and it’s a massive antitrust lawsuit waiting to happen, although I imagine not filing such a lawsuit is a provision in the most recent CBA.

  3. I think when you look at this it doesn’t change much in overall problems the league faces. Which is good, MLS is going fine inspite of the challanges like, How do you get talent in a parity league we want, with some teams not making any money ?

    It is still only 3 DPs, there is still a salary cap ( very low one for some teams revenues )….and maybe just maybe this helps some of the smaller teams sign a DP, who could increase their revenues.

    It certainly is a smarter way to go for my money. When you look at the huge portion of money that the Red Bulls and LA are spending on superstars and how shallow those teams are, it is scary for their fans.

    1. I would say that is true for New York, but LA has some decent players like Juninho, McGee, and Gonzalez. They just haven’t lived up to their potential yet. I think Dallas, Seattle, and Philadelphia are doing things right of all the teams in MLS. Still sticking with San Jose though, and hoping they can turn things around soon.

      1. I am surprised how deep LA is. They have had a few injuries and are still doing ok last I checked.

        Seattle is the deepest team in the league, no doubt about it.
        Some bloggers give them grief for starting starters in the reserve games, but those are the reserves, they just have so many players that can and do start.

      2. San Jose is still in the running. Robert you have the playoff teams, please tell us if San Jose makes it ?

        Robert ?
        Hello Robert, give us a peak at least…..

        1. I don’t watch MLS regular season or MLS Cup. I only watch FMF and Concacaf Champions League. According to 74% of people think Champions League is more important than MLS Cup. HAHAH

          1. Even more of a reason to hate you Robert. Why do you troll MLS sites when you have nothing to say?

            It must kill you to see MLS doing so well.

        2. San Jose acquired a strong, crafty Ecuadorian striker to pair with Wondo since Lenhart and Gordon are both “sidelined”. What the Quakes really need is for Ike Opara to come back and a good winger. Specically a winger that can fill the hole left when Arturo Alvarez was traded to Real Salt Lake.

  4. The problem is that there are clubs that are not even using their DP slots for whatever reason. I do like that they are trying to encourage younger DPs though.

  5. “Exactly, so we are on the same page, we don’t want players being sold, we want to watch them play soccer.
    And the friendlies are garbage to be avoided, let the casual fan, front-running Euro idiots go to them.

    I could have sworn we were on opposite sides at the beginning of this conversation. Good to know I was wrong about that…and right about stooping to be a feeder league.”

    Well you totally mis-read what I had to say then, sooo I guess agree to disagree. See things how you want, I just accept reality.

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