Even with a Salary Cap zeroed in on parity, only 5 clubs of a potential 12 have made it to the MLS Cup in the 6 seasons since MLS introduced Targeted Allocation Money (the “TAM era”). Two clubs, the Seattle Sounders and Toronto FC, have faced each other three times in the six TAM era MLS Cups. Seattle themselves have made four of the six TAM Era MLS Cups.
From that, it seems clear that a pathway to sustained, regular MLS Cup success exists. As we will discuss, one of those factors are teams with high-quality, experienced, players.
However, MLS provides numerous initiatives via its salary cap to incentivize signing young, inexperienced, players who may provide future transfer value for their clubs. This creates a disconnect and a friction between the model that the MLS salary cap incentivizes – signing young players – and the model proven to establish sustained MLS Cup success – fielding an experienced squad.
The question becomes, is there a way to marry both MLS’s incentives to invest in young talent, and the data that shows a strong correlation between having an older, more experienced clubs and winning MLS Cup?
This a second piece in the Breaking Competitive Balance Series. You can view the inaugural piece, MLS Salary Cap 101, HERE
Seasoned Rosters Mark Playoff & Cup Success:
Players’ peak performance ages in soccer are between 24 and 27 years old depending on position.[1]
Seattle, Toronto, Portland, and the Columbus Crew combine for all but 1 of the potential 12 MLS Cup Appearances in the TAM era. In Toronto’s 3 entries into the MLS Cup final, their average ages were 26.4 (2016, loss); 27 (2017, win); and 25.3 (2019, loss).[2] In their 4 TAM-Era MLS Cup appearances, Seattle’s average age was 28.3 (2016, win); 26.4 (2017, loss); 27.1 (2019, win); and 27.7 (2020, loss).[3] The Average age of an MLS cup winners and runners up in the TAM era is about 27.2 years old. To be fair, MLS itself skews towards the older end of the peak-age range, the average age of MLS players during the TAM era was about 27 years old.[4]
The only club to win MLS Cup in the TAM era with an average age under 27 was Atlanta United in 2018, with an average age of 26.6.
From this, it seems that there is a strong correlation between having a cohort of veteran, late-peak or post-peak performance aged players, and getting to the MLS Cup final.
Unsurprisingly, there has long been a dichotomy in soccer (especially MLS) circles about building a team to win-now, or develop young prospects for the future. That Dichotomy assumes that to win now, you need to stack your team with season veterans, NOT young prospects. From the profile of clubs making it to MLS Cup, it is easy to come to that conclusion.
Youth and the Shield:
By contrast, while teams of veteran players can help guide your club through the playoffs to the MLS Cup, having a young team does not necessarily hurt a club’s MLS performance on-field performance. Of the TAM-Era Supporter’s Shield winners (equivalent to a European League Title), Two (Dallas in 2016, and RBNY in 2018) had the youngest average ages (25.2 and 25.4 respectively) in the league that season.[5]
Over the TAM Era, the average age of Supporters’ Shield winners is about one full year younger than TAM Era MLS Cup winners. Only in one year, 2015, did the Supporters’ shield winner (NYRB) have an average age higher than either of the MLS Cup participants. 2020 Supporters’ Shield winners, the Philadelphia Union notably focus their entire club around on building a roster with young, Academy-Developed Players, although their average age was the second-highest among TAM-era Supporters’ Shield winners at 26 years old.
Young DP Initiative:
MLS uses its Salary Cap to incentivize clubs into make specific types of player investments. As MLS has found certain classes of players that might move the needle on the league’s on-field product, it has created rules to push clubs to sign them. This is why we have the “Targeted” in TAM, and the “Designated” in Designated Player.
One key area where MLS provides significant Salary Cap incentives is in signing young, high-value players with high potential upside to both their senior squads, and the transfer market.
One way MLS does this is with the Young Designated Player (“YDP”) rule. Under the YDP rule, instead of keeping all spend above the MLS Maximum Salary Budget Charge off the Salary cap, as is the case for a regular Designated Player (“DP”), for Designated Players that are 21-23 years old, all spend above $200K stays off the salary cap.[6] If the Designated Player is under 20 years old, all spend above $150K stays off the cap.[7]
This means that in 2021, the salary cap impact for a 23 year old Designated Player like LAFC’s Diego Rossi, is less than 1/3 of that of a similar league-leading DP like Columbus’s 29 year old Lucas Zelarayán. In 2021, that frees up at least $412,500 that LAFC can use on the rest of the senior roster that the Crew can’t.
If an MLS club carries three DPs on their roster, they incur a $150K luxury tax on their General Allocation Money (“GAM”) balance.[8] However, if at least one of those three players qualifies for the YDP rule, that luxury tax is waived.[9] So, the true salary cap benefit of having Rossi vs Zelarayán (since both clubs currently carry three Designated Players) is $562,500.
If a club signs two YDPs, they add $975,000 in cap space vs carrying 3 senior DPs. Three YDPs? At least $1.38M; Almost the equivalent of the 2021 Max Tam Charge (1,615,000), and only about $200K shy of MLS clubs’ total 2021 GAM balance.
U22 Initiative:
In addition to these YDPs, MLS has established a U-22 initiative (fondly referred to as “Young Money” by members of the media[10]) staring in 2021 to further incentivize MLS clubs to acquire young, high-value players.[11] Under the program, MLS teams may spend an unlimited amount on transfer fees on up to 3 players that are 22 years old or younger, so long as those players’ individual annualized salaries are at or below the MLS Maximum Budget Charge (so, in 2021 $612,500).[12] All spend for one of these U-22 players above $150K for players 20 years old or younger, or $200K for 21 and 22 year-olds, is off-cap.[13]
Clubs also benefit in the U-22 initiative if they sign YDPs in addition to these U-22 players.[14] If teams have three Designated Players, they can only sign one U-22 “Young Money” player. If they carry less than three DPs, or if at least one of their three DPs is a YDP, clubs can then sign up to three U-22s.[15]
If you divide up the $4.9M salary cap by the 20 potential senior roster spots, that makes an average of $245k average cap space per roster slot, before you include GAM or TAM. That means, six players at $200K budget pushes $270K in raw pre-GAM and pre-TAM cap space to use the remaining 14 slots roster slots.
As well, a club that signs all six YDPs and U22 players has an additional $787K in total salary cap space over a club that signs just 3 senior DPs. For the “big money” MLS clubs that want to use their checkbooks to separate themselves from the pack, this is a pretty great method to do that.
Breaking the Dichotomy: Breaking Competitive Balance
So why spend all this time talking about the cap benefits of signing young players, if the large portion of clubs making MLS Cup consist of older, veteran players?
Using the YDP and U-22 initiatives allows clubs to add nearly the same level of Salary Cap space as each club’s annual GAM balance to push that added on-cap spend further down your roster.
In a league with finite roster sizes, that has huge implications on the overall quality and depth of your remaining non-DP, non-U-22 slots. For the YDP+U22 senior roster model, a club has $3.7M of cap space to spend on the remaining 14 roster spots, or about $265K per slot.[16] For the Senior DP model, a club has about $2.9M of cap space to spend on the remaining 17 roster sports, or $171K per slot. That’s a difference of about $93,6K per slot available for clubs to spend down their roster on players in addition to their off-cap cohort, that can be used on player salaries, or in trades to acquire those key players within the league.
For a comparison, according to the MLSPA’s 2021 salary records, the average total compensation for MLS players is $423,056.43, the average salary for players making below MLS’s maximum Budget Charge $204,195.41, and the average salary of players making below Max TAM $327,131.88.[17] So what a 6 YDP/U22 team gets is basically the salary equivalent of an above-average “regular” MLS player in every roster slot before you start to use TAM and GAM.
Final Considerations:
To put it simply, leveraging the YDP and U-22 initiatives allows clubs focus on-cap spend to build a core of highly skilled, veteran, MLS players who can guide a team through the MLS playoffs by investing in young, bright, and potentially expensive talents playing at below their peak performance age.
But that’s not all!
These salary cap benefits do not consider the financial value and cap benefits of spending on players signed before their peak age. For young, there will be a potential their clubs to transfer them out at a profit. This type of investment then transitions your player spend from a cost center to potentially a revenue generator. Since, in most cases, a club may convert up to $1M of a transfer revenue as GAM,[18] focusing off-cap spend on young players with high potential upside can allow clubs to convert off-cap spend to on-cap value for future rosters down the road.[19]
Finally, the points made in this article don’t consider the benefit of investing in scouting and analytics and player development, and how such investments can improve the quality and output of these investments in young, top-of-roster players. Those considerations will be (hopefully) addressed in later articles in this series.
[1] See, Dendir, Seife, When do soccer players peak? A note at, https://content.iospress.com/articles/journal-of-sports-analytics/jsa0021
[2] Id.
[3] Id.
[4] See, Major League Soccer Average Age, Transfermarkt, at https://www.transfermarkt.us/major-league-soccer/altersschnitt/wettbewerb/MLS1/plus/?saison_id=2019. 26.9 in 2015; 27.4 in in 2016; 27.1 in 2017, 26.9 in 2018, 27 in 2019, and 26.8 in 2019. These raw numbers won’t average out perfectly to 27 as the league size has changed In each year, so each season keeps a different weight each year.
[5] See, Major League Soccer Average Age, Transfermarkt, at https://www.transfermarkt.us/major-league-soccer/altersschnitt/wettbewerb/MLS1/plus/?saison_id=2019.
[6] Id. at “Designated Players”
[7] Id.
[8] Id.
[9] Id.
[10] See, https://twitter.com/samstejskal/status/1362833259995017217
[11] See, MLS & MLSPA ratify new Collective Bargaining Agreement, at https://www.mlssoccer.com/post/2021/02/08/major-league-soccer-mlspa-ratify-new-collective-bargaining-agreement-0.
[12] See; MLS Roster Rules, at U22 Initiative Roster Slots, at https://www.mlssoccer.com/about/roster-rules-and-regulations; The Roster rules say that the $200K salary cap is for 21 to 23 year-olds, but since it is called the “under 22 initiative,” it seems like the 23 is the typo, not the name of the initiative. See also, Stejskal, Sam, MLS’s Under-22 Initiative Explained: How it Works, Benefits and Risks, The Athletic, at https://theathletic.com/2399390/2021/02/19/mls-under-22-initiative-explained/.
[13] Id.
[14] Id.
[15] Id.
[16] This doesn’t include TAM or GAM allotments, which are equal, so just simpler to compare apples to apples if we’re assuming full-spend.
[17] See, MLSPA Salary Guide, 2021 Salaries, at https://mlsplayers.org/resources/salary-guide. Notably none of these averages consider transfer fees, which would also count towards the player’s Salary Budget Charge, so average MLS Salary Budget Charges are likely much higher.
[18] Although that further complicated by the U22 initiative, but that is a topic for another time.
[19] See, See, MLS Roster Rules, Usage of Revenue, https://www.mlssoccer.com/league/official-rules/mls-roster-rules-and-regulations
Andrew Visnovsky 