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Show Me The Money

Examining the Ramifications of Solidarity Payments

MLS: LA Galaxy Unveil David Beckham Statue Kirby Lee-USA TODAY Sports

In recent years, Major League Soccer has worked diligently to present and market itself as a developmental league, a place for top emerging talent to hone their craft while benefiting from the experience of global stars.

In service to that goal, MLS has invested heavily in its academy system, looking to improve the overall quality of players in the league. In the past decade, more than $100 million has went into franchise academies, leading to great strides forward in player development, upgraded facilities, and overall improvements. The result has been an explosion of talent in the league and a massive increase in viewership and visibility for the league, as they are found on more channels and news outlets, due in large part to the increase in on-field talent.

Last week, MLS made a massive change to support their growing academies and league, with the decision to begin participating in the FIFA-sponsored training compensation and solidarity payment programs, reversing a position that they have held since forming in 1996.

At face value, this looks like a great decision for the league. It helps protect their young assets that clubs work hard to find, train and develop, and helps to reassure ownership that their investments in their academies will more likely bear fruit for their clubs.

Speaking to ESPN about the financial decision to participate in these FIFA payment systems, Major League Soccer’s VP of player relations and competition Todd Durbin echoed these thoughts.

“[MLS] has been making increasing investments in youth development, and that investment has accelerated over the past few years,” Durbin said. “We intend on continuing to make that investment and we want to grow that investment. But in the event that a player that we developed decides to sign overseas, we believe that we should be able to recoup the value of that investment.”

League commissioner Don Garber echoed these thoughts while defending the league’s position on changing their stance on payments.

Garber noted that “Our view about this whole area is very different than it was two, three, four or five years ago. The product that we’re developing have become some of the most important assets that we need to start figuring out ways that we’re either protecting, or we’re finding ways to get compensated for if we can’t protect them or can’t sign them.”

For MLS, it’s all about attracting ownership to make investments in the league. With the recent announcement that the league is looking to expand to thirty teams, with buy-ins surpassing $200 million, the league needs to present its prospective ownership partners with a high return on investment, something MLS accomplishes through protecting those investments made in players and facilities.

This decision has been met with great disdain from the Player’s Association, who argue that this goes against measures adopted by both US Soccer and the Canadian Soccer Association. But before diving into the counter-argument for this new fee structure in MLS, it is important to understand what exactly these fees are. Let’s start by looking at what each program entails from the league’s viewpoint, starting with the training compensation.

With the FIFA regulations MLS is adopting, when a player that has been part of the academy systems registers as a professional for the first time anywhere outside of the US, his new team will be responsible for paying Training Compensation to every club that contributed to his training. This compensation requirement is in effect from a player’s twelfth birthday through the end of the season in which they turn 21.

The amount that the clubs that provided the training club receive is based on a sliding scale, based in part on region, and how much the club invested in its training programs, as determined by FIFA.

Similarly, MLS clubs will be entitled to solidarity payments when their former academy products are transferred for a fee between clubs, meaning they will be eligible for a share of all transfer fees as long as that player remains on their initial contract that was signed while they were still with the MLS academy, regardless of the player’s age.

Solidarity payments usually amount to about five percent of the agreed-upon transfer fee, and are split between all clubs that had a hand in that player’s training from ages 12-23. However, MLS has determined that any non-MLS clubs in the US and Canada will not receive any compensation for training and development.

So, if this is, as MLS claims, a great step to ensure continued elite-level development of youth players in the US and Canada, why does the MLS Player’s Association so thoroughly oppose these measures?

The MLS Players Association believes that the language MLS is using to justify their decision is a complete sham, disguising an effort to protect their money as looking out for player interests. Shortly after MLS made their announcement, the Player’s Association issued a harsh statement condemning the league’s decision and outlining their complete opposition to the new standard.

In their statement, the Major League Soccer Players Association claimed that “today’s announcement by MLS regarding training compensation and solidarity payments is a step backward for the development of soccer in the US and Canada. It is an effort by the league to inhibit player choice, does nothing to address the development of youth soccer, and makes plain MLS’ selective application of international rules to suit its own agenda. Despite claims to the contrary, this move is not about improving youth development. Rather, it is simply about trying to force players to sign with MLS by limiting opportunities abroad.”

The Association went on to point out MLS’ hypocrisy in their defense that they are just attempting to follow FIFA’s guidelines, by spotlighting the numerous regulations adopted by FIFA that the league does not implement that would provide more security for players both financially and on the pitch, by guaranteeing and shortening contracts.

Furthermore, MLS has made it clear that the league will not pay training compensation for players it signs through the draft or acquires into its youth academies. In addition, if a player was developed with both an MLS club and an independent youth club, MLS said it would only seek the training compensation for themselves and not for other clubs. This further illustraties the hypocrisy of their rationales for the move as anything other than a cash grab meant to attract more investors to the league.

Importantly for the league’s defense in this argument, the FIFA regulations do not prevent any academy from waiving or modifying its right to receive training compensation in any deal. So if they desired, they could hypothetically waive their fee if it was a holdup to a player being able to play abroad. Also, since FIFA regulations don’t require domestic payments, MLS clubs will not seek any training compensation for players who go professional with any non-MLS teams in the US or Canada, allowing players to move freely domestically. Thus, the Player’s Association concerns that this decision will impact player freedom and movement could prove to be over exaggerated depending on the league’s whims.

At the end of the day, MLS is making the right decision, despite push back from players and their representatives. The league is currently experiencing major growth and a spike in popularity, coinciding with better than ever overall talent and increased investments in players, facilities and operations. This increased spending needs to be somewhat insured to keep investors pumping money into the league, and this move is a good step towards that end.

So what do you think? Is this as good of a move for the future of the league as it seems? Or is it another potential burden for young American players to overcome in their development? Let us know in the comments.