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Mar032012

Beckham Rule in MLS

Hello Internet Sports World! You may now all breath a sigh of relief. Sharpening my teeth on the exploits of a small amateur Portuguese soccer club in beautiful Victoria, BC, and damn near seven years later since my last piece of writing, your prodigal son has returned. I've always considered returning to the blogosphere and sharing insights on anything and everything related to soccer and the sports business, but never had a real motivation to get something off the ground. Enter my good friend Raj, a man who literally can smell an idea a mile away. The rest, as they say, is history.

Being a passionate footy fan, who still plays for that small amateur Portuguese soccer club in the capital city of BC, and working in the sports world for the past eight years, I figured I would try and focus my articles on the business side of the soccer world.

SALARY CAPS

American sports leagues are protected by a system of pay equity. The system varies from sport to sport, but the idea remains the same.   Salary caps in Basketball (NBA), Hockey (NHL), American Football (NFL), and Baseball (MLB), help curb extraordinary player contracts and ensures owners don't get too big for their britches. 

When you compare the MLS to these other North American sports leagues, you'll notice but one difference. The MLS salary cap is, by far, the lowest salary cap.  

* Chart is in millions of dollars

BECKHAM RULE

Now, having the the lowest salary cap in North America probably isn't the worst thing ever for the MLS.  The league has seen some amazing growth since their first kick in 1996.  That being said, you can't compete with the big boys until you're a big boy yourself.  

That all changed in 2007.  The year that MLS, and the LA Galaxy, announced the signing of England golden boy David Beckham.  It was a stark contrast from the frugal spending the league trumpeted in its infancy.  MLS was now ready to take the plunge and begin spending "real" money on attracting top quality athletes to the North American league (one must bear in mind that most current DP's are either past their primes or very good second tier players in Europe).  The Designated Player (DP) rule, or Beckham rule as it is often referred to, allowed MLS teams to circumvent the salary cap and sign players regardless of their contract size.   Each club received one DP spot, although they could trade with other clubs for another DP spot.  Only a portion of their salary, $400,000 to be exact, actually counted towards the overall salary cap of the team ($325,000 for the second, and subsequent, DP spot).

In 2010 the Designated Player Rule was revised. The value that a player's salary accounted for fell to $335,000.  The value was divided if players were brought on under the DP rule mid-season. Each club was allocated two DP spots, but were no longer allowed to trade for any more.  A third DP player could be signed, but that would require the club to pay a luxury tax of $250,000, which would be equally distributed to those clubs who did not register a third DP.  Confused yet?  Tell me about it.

Now comes 2012, and once again the DP rules have changed.  A DP over the age of 23 would carry a $350,000 hit to your salary cap, whilst a player between the ages of 21-23 would only count $200,000 against the club's salary budget.  Last, but not least, a DP under the age of 20 would only count $150,000 towards any club's salary cap.  Sprinkle in a few more DP rules here or there, but at the end of the day the MLS was making a strategic decision with these new changes.  The middle aged David Beckham signings of the past will not be the norm moving forward.  Younger more promising players need to be brought into the fold.

DP SUCCESS?

Although several studies and American researchers advocate that the presence of top players have improved attendances within the league, the hiring of players like David Beckham have not brought about a sustained increase in MLS attendances.  

TIME 

Attendances 

% Change 

2005

15,108

-

2006

15,504

3%

2007

16,770

8%

2008

16,407

-2%

2009

16,037

-2%

2010

16,675

4%

2011

17,844

7%

* Average league attendance

Becks had a significant impact in 2007, but in subsequent years attendances began to drop, which brought about the change in the rules in 2010.  In turn, this has led to another increase in attendances in 2010 and 2011.  What does 2012 have in store?  Most likely another increase in attendances and the continued strategic growth of the MLS Salary Cap model.  

Now do I need a catchphrase to end my first blog post?  Sure, why not! Toucan Sam...Follow your NOOOOSE!


About Mark deFrias

Mark is a passionate footy fan, who still "attempts" to play for a small amateur Portuguese soccer club in the capital city of BC. A sports marketing professional for the past eight years, his interests are related to the business side of the sports world. Follow @pacificblvd

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Reader Comments (2)

I read this blog this is very informative blog for me and for the other who interested in watching the match and participate in the games.but here is question that i wanna ask you. you said in this blog about the players salary cap.i wanna ask you that does all the players take equal salary in the game?

April 8, 2012 | Unregistered Commentermessi

Thanks for the kind words. To answer your question, each MLS club has a salary cap of approximately $2.65 million per year for their whole team. Therefore, when you add up the total salaries of each player on a particular team it must not exceed that amount. The only players that can exceed that amount are Designated Players (DP) but a portion of their salary does count to the salary cap. DP salaries are explained above, but if you have more questions let me know.

April 9, 2012 | Registered CommenterMark deFrias

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