Keep the profit: Proposed transfer-fee changes give MLS teams incentive to sell

Kim Klement-USA TODAY Sports

MLS takes too big a slice of most out-of-league transfers. That's about to change for the better.

Major League Soccer has to start deciding what kind of league it wants to be, and as the offseason nears, indications are the league is creeping toward providing more incentive for owners to sell players.

As it stands under current rules, there is little incentive for teams to sell players who don’t have the Designated Player tag. Teams can only apply up to $650,000 of a transfer fee as General Allocation Money for first-team improvement. The rest of profit from a transfer – a percentage of which is taken by the league – must be applied outside the first team, with the lone exception of earmarking those funds to sign a DP.

That’s about to change.

With MLS growing day by day and teams investing more both in player acquisition and academy development, the league is looking at altering some of its rules regarding transfer fees.

Multiple league sources tell me MLS is set to approve a new rule this offseason that will allow teams to keep 100 percent of transfer fees for Homegrown Players. This incentivizes league owners to invest more in player development, and rewards the teams that do so successfully. Currently, MLS receives 25 percent of any Homegrown transfer.

In addition, the league is weighing a proposal that would increase the cap of transfer revenue used as General Allocation Money. According to one source, the proposal would also see that cap increase incrementally from year to year. It is not immediately clear how much that cap would be increased – sources indicated it has not yet been determined – however, it makes sense to see a substantial jump.

Under the current restrictions, Sporting Kansas City benefited more from trading Dom Dwyer within the league – to the tune of nearly $1 million in allocation money – rather than selling him to Europe. It makes sense that the Dwyer trade should set a baseline for transfer revenue.

This is a substantial development for the league because of one key word: incentive.

Mark J. Rebilas-USA TODAY Sports

DeAndre Yedlin (Mark J. Rebilas-USA TODAY Sports)

The incentive to sell is so much greater in the entirety of global soccer than it is in MLS. Too often in this league, teams don’t see enough of a benefit within the first team to sell assets. There is no significant difference in roster budget space created between selling a player for $20 million and $2 million other than a potential DP signing. That’s just the bizarre reality.

This is especially true when it comes to selling non-DPs in MLS.

The cap allows for ownership to interpret the sale of a player like DeAndre Yedlin, for example, as a net loss when it comes to the first team. Yedlin was on just $92,000 as a Homegrown Player for Seattle in 2014. He did not count against the cap.

He was, in other words, a massive asset because his budget number was significantly less than his actual value. Selling Yedlin for $4.5 million did little to change that within the first team. The cost to replace a right back of Yedlin’s level is significantly more expensive than simply keeping a player of that value on a low salary number.

So why sell?

You can apply the same logic to Orlando City’s Cyle Larin, who is significantly underpaid and even more valuable when you consider the cost of replacement in the international market.

As MLS continues to mature, the league is going to have to ask itself how much it wants to limit its own growth. Many of these protections were put into place to preserve the competitive balance of the league. But as MLS splits into the haves and the have-nots, the wills and will-nots, the imbalance in ownership ambition and spending is creating a real chasm.

These potential changes are a positive indication the league is starting to understand the frustration of ownership that is seeing too little reward for investment – at both the first-team and academy levels.

The new rule wouldn’t fix everything regarding incentives for selling players. Multiple sources said they hope, however, that it pushes the league closer to a breaking point where the league finally aligns closer to the global soccer economics.

That breaking point may still be years away, but at least there are baby steps of progress.

Facebook Live Question of the Week

Every Thursday we do a live Q&A on FourFourTwo’s Facebook page. I select one question from that Facebook Live session to expand upon in my Monday column. Come join us this Thursday!

Joseph Johnson - Is Toronto unstoppable?

Nope.

We definitely saw against the New York Red Bulls that Toronto FC is susceptible to an upset. The Red Bulls got into Toronto’s collective head in the second leg of the Eastern Conference semifinal.

They used Tyler Adams to take Michael Bradley’s calming influence out of the game. They weren’t afraid to commit a few hard fouls or to battle with anyone who wanted to take it on. Toronto couldn’t handle it mentally. The result: Jozy Altidore picked up a red card and Sebastian Giovinco got a yellow card for complaining, and now Toronto will have to go on the road in the first leg of the Eastern Conference final without two of its top strikers. Michael Bradley is also sitting on a yellow card. That most definitely puts TFC on the back foot going into the conference final.

Right now, Toronto is far from unbeatable. The Reds haven’t been playing their best soccer. They’ve got multiple players missing with suspensions. Toronto has plenty of work to do to get back to MLS Cup and finish out the job it’s been focused on since losing at home last year.

The Final Third

Credit to Houston

There were plenty of doubters in MLS when Houston hired Wilmer Cabrera. Boy, has Cabrera proved those doubters wrong.

The Dynamo defended superbly in Portland and pulled off a 2-1 win few would have predicted going into the postseason, let alone the beginning of the year. Houston finished dead last in 2016 and bounced back this year, its first under Cabrera. The team now stands just a couple results away from a potential MLS Cup appearance.

The Dynamo did a really nice job bringing in some MLS experience as well as dynamic players from abroad. The question that lingers over this team: What happens with Alberth Elis next season? His purchase price is a big one. It’s a question the Dynamo won’t have to answer for a few weeks now, though.

Give a ton of credit to Cabrera, who didn’t even crack the top three for MLS Coach of the Year.

More coaching feats: USL, NASL finals set

There were so many amazing moments in American soccer on Sunday, but none will top this: a missed Panenka penalty kick from Juan Guerra to move on to the NASL championship (failed Panenka takes place at the 8:11 mark).

The New York Cosmos would go on to win, 6-5, which gives Guerra a bit of a reprieve after this. You have to love the moxie, but … woof.

A ton of credit goes out to two of the top coaches in the U.S., both of whom deserve looks in Major League Soccer. The Cosmos’ Giovanni Savarese has been reported as a candidate for the New England Revolution, but the San Francisco Deltas’ Marc Dos Santos has gotten his team to a final despite the fact that it’s set to fold at the end of the season. It has been a trying season for Dos Santos in San Francisco, and the fact that he’s been able to get the Deltas to the final is a credit to a coach who has been incredibly successful on three different teams in the lower divisions of American soccer.

It’s only a matter of time before Dos Santos gets his shot.

The USL final is also coming up, and Swope Park Rangers are back in the championship game to take on Louisville City FC. While Dos Santos and Savarese face off in the NASL final, it's worth noting that Louisville’s James O'Connor is another coach who has found plenty of success in the lower divisions. The former Orlando City midfielder might just be able to work his way onto the radar of some bigger clubs as well.

Read of the Week

I really enjoyed this story from Henry Bushnell on how the #SaveTheCrew movement became a thing.