By Jared Young (@jaredeyoung)
Major League Soccer is thankfully becoming more and more transparent every year, and as they peel back the curtain fans can understand (and challenge) the strategy of roster compositions of their favorite teams. Ultimately the printed rules allows fans to become more intimate with their teams. This year MLS published rosters that allocated players between the senior roster, supplemental and reserve roster positions. They also shared details about General Allocation Money (GAM). At this point it’s worth the effort to take stock of the various roster rules and funding agreements between the team and the league to determine some paths to building an MLS team.
Pieces of the pie
Each team receives between $5.7 million to a little more than $6.0 million per year from the league to fund their roster. In addition owners can fund the salaries above $480,625 on three Designated Players that can send the total overall salary pool north of $20 million, like it does for Toronto FC. Here are the basic components of a roster and the expenses for 2017:
- Salary budget for senior roster: $3,845,000
- Supplemental and reserve rosters: At least $472,000 but could be slightly higher than $700,000 if the full homegrown allotment is used in addition to all 30 roster spots.
- Targeted Allocation Money (TAM): $1,200,000 to be spent on players that cost between the salary maximum of $480,625 and $1,000,000. Teams can also choose to spend $200,000 of TAM to sign homegrown players.
- General Allocation Money (GAM): Starts at $200,000 and likely no more than $400,000 (is equal in Expansion years).
- Designated Players: Unlimited salaries and transfer fee on up to 3 players with a minimum cost of $480,625.
Note: If your team is not spending at least $5.7 million on player salaries (i.e. Houston, Montreal, DC United and Minnesota) it is okay to wrinkle your brow and wonder what’s up, especially if the owner is paying some of that money for DPs. The gap may in fact be hidden in a transfer fee allocation which would be perfectly acceptable. It may also be sub-optimal use of league funds.
For fans or general managers of the teams which monies are the most important to get right? Here’s my ranking of the most important forms of funding in MLS.
1. Designated Players – This one goes without saying. If the owner is willing to spend above what the league offers then that is free talent for a fan or GM. And money matters in soccer. Don’t let anyone tell you differently. Since 2008, when Designated Players were introduced, teams that spend more than two times the league median on players make the playoffs 86% of the time. The rest of the league is left to flip a coin. No money is more important than money that sets the talent apart from other teams in the league and history bears that out.
2. Supplemental and Reserve Rosters - Ranking this pool of funds as the second most important might surprise a few, but hear me out. This is the only pool with flexible funding. In this pool a team can spend an extra $200,000 on salaries for free if they play their cards right. And if they can get production out of homegrown or Superdraft players without hitting the salary budget that can be critical. This pool, if successfully managed, will also benefit the core salary budget pool as players graduate to the senior roster at lower salary levels. This is clearly the current strategy of the New York Red Bulls, FC Dallas, and Real Salt Lake - maximize their homegrown pipeline because the salaries are initially off budget and then low cost for the first few years. This pool is why the academy system is so important and why teams like the Philadelphia Union are publicly pointing to this as their strategy.
3. Salary budget for the senior roster - This $3,845,000 is where most teams live and die season to season. The goal here is to straight up get the most talent for the dollar. Teams like Sporting Kansas City do this well as they are consistently competitive without spending big on Designated Players. Meanwhile the Union have spent a similar amount and talent is one of their issues. Finding gold in the senior roster is critical but as you will see in a chart below, it's very difficult to separate talent consistently within this budget.
4. Targeted Allocation Money - TAM was introduced before the 2014 season and it poses an interesting roster dilemma for GMs. The basic issue is should a GM invest in a few higher priced players or upgrade more lower priced players? Let's look at examples in two extremes. A GM could use all of the $1,200,000 million to buy three players at around $875,000 each OR they could buy a handful of players that make $500,000 and use that money to buy their salaries down and in effect turn eleven $100,000 players into eleven $200,000. So how much better are three near million dollar players than a starting lineup upgraded to a smaller degree?
Will having more $500,000 to $1,000,000 players actually help a team? The answer is a bit surprising so far.
The more TAM eligible players (roughly defined) a team has actually negatively correlates with success. More than anything this is because teams with more $500,000 to $1,000,000 players have fewer players greater than $1,000,000, which is a bigger influence on winning. The jury is out on the quality versus quantity question that TAM poses.
5. Last but not least is General Allocation Money (GAM) - Now that we know that GAM is just $200,000 and perhaps up to $400,000 the options are pretty limited. The best use of GAM by far would be to buy down a mid-priced DP so that an owner could free up more space for a higher priced DP. In the worst case an owner might use GAM to pay down a DP and simply keep the money. It's unlikely that most owners optimize GAM by using it to get an extra DP. GMs more than likely just use this as a simple extension of the senior roster pool, the only difference with this pool is that it is trade-able.
These buckets of spending create a blueprint for how to construct a team. If the owner is not willing to spend significantly beyond the rest of the league then the next best option is to build through the homegrown system and Superdraft. These players don't count against the cap and will be inexpensive for a number of years. One thing to keep in mind is that as the league grows and the talent improves the gap between young players and the rest of the league might grow, making it more difficult to produce MLS ready players at a cheaper price.
Next is good old fashioned moneyball. How does a GM get good value for the buck? This is done through analytics and shrewd scouting. Next comes the use of allocation money. Since TAM is the biggest, it's the most important and there are interesting options on how best to spend it. GAM is really an afterthought and unless it's buying down a DP it's really only helping the teams that get an additional helping of it.
Who is winning?
How allocation money is used is difficult to determine and is a transparency opportunity for MLS. However, we can look at overall spending as well as academy output and see the different strategies of MLS clubs. I created an academy quality index I call CUMAI, which stands for completely unscientific MLS academy index. It leverages three pieces of data. The first is the number of homegrown players on the current roster (40% weight). The second is a ranking published by Will Parchman (40%) and third is the number of players recently chosen for the U20 World Cup and U17 CONCACAF Championship (20%).
Plotting the CUMAI against total team compensation yields some very interesting results.
At least in 2017, spending more than $10 million (where the horizontal dotted line is drawn) on a team has yielded a +27 goal differential. The low spenders are left to pick up the scraps. However, teams that score above average (vertical line) with their academy fare much better. If you take Real Salt Lake's -20 goal differential the academy teams are performing quite well. To be one of those teams with a lower half academy and low salary is not a good place to be.
Of course causality is a question here. It could be that teams with good academy systems are just better run organizations in general, which may be driving success. They may have better facilities or better scouting organizations, better leadership, etc.
How much money a team spends and how well their academy is producing seem to be the key indicators of success in MLS. That's not to say moneyball tactics or witty use of allocation money aren't important. It's just that right now it's not easy to find examples of teams differentiating themselves with those pools of money.