The huge news out of MLS today was the tweaking of the Designated Player rule, a loosening of the reins that will help teams like the Red Bulls bring in stars like Thierry Henry, help MLS bring in stars like David Beckham.
The league held a conference call earlier this afternoon, and while I haven’t had time to touch on a lot of topics since then–NIT duty at the Garden called–here is a transcript in Q & A form. Hopefully you find it both enlightening and interesting.
TODD DURBIN: Thank you, everybody, for being on the call. Obviously this is an exciting day for us. We are very excited about this modification to the designated player rule. For us it represents our continued evolution towards pushing more autonomy to our teams, and increasing flexibility at the team level to allow each club to build rosters in the manner that it thinks is best.
Most importantly, it represents a continued commitment by the League to ensure that there are mechanisms in place to improve the quality of play and make sure that we have the best product on the field.
I thought what I would do is quickly walk through the rule changes. As you know, in the past the way the designated player was set up, it was one designated player per team and the teams had the ability to trade for a second designated player.
The designated player charge in 2009 was $415,000, which represents approximately 18 percent of the overall salary budget, and in the past, teams could not use allocation money to buy down the budget charge of designated players.
So there were really three significant modifications to the rule that the owners adopted back in November:
The first is the increase in the number of designated players that a team may have. Now, each team is given two slots to acquire designated players. Teams have the ability to acquire a third slot by making a $250,000 cash payment to the League office, which would then be disbursed to all teams that don’t have [three] designated players on a pro rata share of allocation money. So the first change was the increase in the number of designated players that a team may have.
The second change was that we actually lowered, as a percentage of the overall salary budget, the amount the designated player takes against a team’s salary budget.
As I said in 2009, designated players were charged at $415,000 for the first and $335,000 for the second. The first designated player was on a team’s salary budget and 18 percent of their overall team’s salary budget. That has been reduced to $335,000, and at the same time the overall team salary budget has increased from 2.315 to 2.55 million. The upside of all of these numbers is that the designated player now represents only 13 percent of the overall team salary budget. So it’s a reduction by five percent, which is significant.
And the third change, as I have already referenced is that in the past, you could not use allocation money to buy down the salary budget charge of a designated player. So if you add a designated player on your roster, he was $415,000 and you could not use allocation money to buy that budget charge lower. Now, you can buy that budget charge lower, down to as low as a $150,000. If you sign a designated player, that player would be on your roster at $335,000, and if for example you wanted to apply $135,000 of allocation money against that slot, he would actually be on your budget at $200,000, again increasing flexibility for our teams to be able to build the rosters.
Question. Given that right now just five of the 16 designated player slots have been in use, what has to happen to cause the teams to start using them?
TODD DURBIN: I think that’s a great question, and I think it’s one of the reasons we implemented these modifications. Obviously this is now a new change, so I think it’s going to take a bit of time to see the impact of it. Our expectation is that you’re going to see more activity with regards to designated players in the summer transfer.
One of the things that we talked about with respect to the designated player rule was trying to find a balance in terms of the way in which the rule was created and the way in which the rule was implemented.
The goal of this rule is to allow teams that want to go out and sign star players the ability to do that in a way that is competitively neutral. If a team decided that they didn’t want to have a designated player and they want to build their roster in a different way, for example, an emphasis on young players or young players to draft, that to be competitive in the League, they would not have to have a designated player.
One of the things that we have found over the last few years with the designated player rule is that if you had a designated player that was successful on the field, that the budget charge and the rules that we had in place allowed that team to be successful on the field, as well.
One of the challenges that we found was that in the event that the designated player was not successful, I don’t want to say it made it impossible for a team to compete, but it made it very difficult for a team to compete.
And one of the things that our teams and our owners said to us was that given the fact that the nature of signing players is difficult and you’re not always going to be 100 percent, that if you were unsuccessful, teams then found themselves in a situation where they had a designated player on their roster at 18 percent of the salary budget for a couple of years. That actually provided a disincentive for teams to go out and sign designated players. So the rule, with the three changes that we made, is designed to take that factor into account. With the modifications, if you weren’t successful, you still have the ability to go out and acquire another designated player and build your roster.
Question. Do you need the star players to attract attention and start getting to the point where you vastly increase attendance and TV ratings?
TODD DURBIN: Well, I think it’s market‑by‑market. Certainly in some markets, star power is critical in terms of driving attendance. And one of the things that we are looking at is the way in which to drive attendance and to drive ratings.
Some teams believe that the best way to form an affinity in the local market, for example, is through investing in local young players and having an affinity and connection in the market in that regard. Some teams believe that the best way to drive attendance and to drive ratings is to have star power. I don’t think it’s a one‑size‑fits‑all. I think that the rule that we have adapted is designed to recognize that fact and isn’t a one‑size‑fits‑all.
Question. Has MLS ever paid a transfer fee for the designated player in the 13 DP’s so far?
TODD DURBIN: Have we ever paid a transfer fee for a designated player? I’m trying to run through the list in my head. Again, I would have to go back and look into that to be honest with you. I don’t think so, sort of looking down list of players that we signed. I think we paid a transfer fee for (Marcelo) Gallardo when we signed him, but other than him, I’m not sure that we have paid a transfer fee for a designated player.
Question. Is that something that limits a little bit what MLS teams might have ‑or MLS teams might be able to get?
TODD DURBIN: I don’t think so. I think that whether you’re paying a large transfer fee or a large signing bonus or a large guaranteed amount, the way our teams view it and certainly the way I view it is as a total cost.
So whether you’re paying $2 million a year over three years and it’s basically all in salary for $6 million, or whether you’re paying a $3 million transfer fee and a million each year in salary, at least the way we try to think of that is what’s the overall spend that you have to invest in the player.
I don’t think that whether there’s a transfer fee or not a transfer fee impacts it. At some level it’s easier to get players that are out of contract but the way in which the market is today, often times in talking about a designated player, they have the ability to command such a high salary that if you’re not paying a salary fee, you’re often times just paying it directly to the player in terms of salary.
Question. How was this move approved? Was this a decision that the league made or did the individual teams have to vote to pass this resolution?
TODD DURBIN: It was made in conjunction with our Board (of Governors). One of the things that we do each year, one of the things that the competition committee is charged with, is a review of our rules and to make recommendations to the Board.
One of the things that the Board asked us to do at the end of 2008 was to review the designated player rule since it was set to expire at the end of 2009, take a good look at it and see if it was meeting the stated objectives.
As I said, when we first launched the designated player rule, the objective was to allow teams that wanted to go out and sign big‑name expensive players, that they would have the ability to do that in a way that was competitively neutral. And so what the Board asked us to do it at the end of 2008 was to take a good, hard look at that and see if we had achieved our goals.
I think the upside of that was that the recommendations that were ultimately made to the Board were that we thought that the best thing to do was to make some modifications to that rule. It was brought before the full Board and it was unanimously approved.
Question. Obviously parity has been a huge platform with the league since its inception, do you worry that these rule changes might undermine that concept at all?
TODD DURBIN: It’s something that we are obviously always thinking about. For us, parity when we think about it at the league level is really about opportunity for success.
We are not ultimately looking for every team, in fact, to be successful. What we are trying to do is to design a league that gives every team the opportunity to be successful.
And so the way in which we structure the designated player rule, it’s supposed to allow teams that want to go out and sign high-profile players the opportunity to be successful. But at the same time, we made sure it’s calibrated in a way that teams that don’t want to go out and sign designated players also have the opportunity to be successful.
And that’s really the role that the salary budget charge plays. If the salary budget charge is very high, let’s say it was $1 million, as opposed to $335,000, then that would make it difficult for a team to build its roster because it would only have $1.5 million for the remaining 19 players. Similarly, if it was too low, it would run the risk of giving teams a competitive advantage on the field.
And so part of what we are evaluating is making sure that we have that salary budget charge put at the right place where it is, in fact, patently neutral and our hope that is that the rule modifications that we have made, that that will be the case, and we believe it will be.
Q. Along the lines of the salary budget questions, talk a little bit about the reason why you added additional designated player spots, which you’re looking at another million, 1.2 million when a team could spend…when you count the 250,000 to buy a third slot, why add additional DP slots and not increase the overall salary budget, which would maybe it trickle down and allow teams to increase the salaries at the lower end of the spectrum rather than widen the gap.
TODD DURBIN: I think it’s a great question, and I don’t think we think about it as an either/or. Obviously we did have a significant increase in our salary budget this year.
So I think the risk/recognition on behalf of the league, that there needed to be an increase in the salary budget which obviously was not taking place for 2010.
Again, it was part of evaluating the rule through 2009. One of the things that we are looking at, and you’re looking at the number of designated players and you’re also looking at the budget charge, all of these issues are interrelated. I keep coming back to themes…I apologize if I’m talking about it a little bit too much, but again, the notion, the driving force behind it is to allow teams that want the ability to build their roster around high-profile players; that they have the ability to do that. But do it in a way that’s competitively neutral.
So when we originally adopted the designated player rule, the thought was that each team would be able to have one, and obviously there was a debate as among all of us internally at the league level as to whether or not we would be able to increase that, because more designated players we have, the greater the quality of the league we are going to have.
And the result of that discussion and the ultimate recommendation to the board was that we could; we could increase the number of designated players and give teams even more flexibility in terms of how they want to build their roster, provided we managed the salary budget charge appropriately and remained competitively neutral.
And so that was the goal. The goal was to try to provide as much flexibility to our teams as possible and give them the opportunity to build their rosters in the way they see fit.
Question. Would increasing the salary budget another 1.255 have accomplished that, as well?
TODD DURBIN: Yeah, but you have to make decisions and you have to make trade‑offs in terms of what’s the best way to increase quality on the field.
Obviously one way to do it is to increase the overall salary budget. The other way is to more narrowly focus it on one or two or three players and pay them significant salaries.
I think that where we come out on it, ultimately, at least right now, is that we do both; that we have increased the salary budget by a significant amount, by over $200,000 this year, and at the same time, given teams the opportunity to go out and sign players outside of the salary budget.
So it’s a compromise. We don’t view it as an either/or.
Question. Was it a unanimous vote amongst the board of governors? Can you talk about that?
TODD DURBIN: I don’t want to get into the internal discussions of what happens at the board level. What I will tell you is that the vote was unanimous and that the full board is behind these changes.
Question. As far as players who currently make more than that figure, that $335,000 figure, how are they treated?
TODD DURBIN: The way it works, the way the designated player rule works is that it’s designed to cap the players you could not otherwise afford with the use of an allocation.
So for example if you have a player that’s earning, let’s say $435,000, for ease of math, then the team in that situation could accommodate that player simply by using $100,000 of allocation money and buying him down to $335,000. So in that situation, the player would not have to be a designated player. He can actually be used via allocation.
Our general rule is that once you get north of about $475,000 and the $500,000 range, that’s when you’re in a world where players are transitioning out of the allocation realm and into the designated player realm.
Again, the reason why we implemented the rule was because we knew the way our allocations were set up that the teams who were able to afford players — sort of the $350,000, $450,000 salary range by use of allocation what we were not able to spend money on — given our salary budget constraints, were players making more than that or significantly more than that.
So the designated player rule was a mechanism that clubs could sign players that they could not sign in the normal course by use of allocation money.
I won’t want to use a salary-specific example, but if a team was going to re‑sign a player and his salary put him at a point where he would have to be a designated player, then that’s certainly possible. But we would look at it on a case‑by‑case basis.
Question. The process, was this discussed with the players during the CBA negotiations? Was it something that they pushed for or was it something the clubs were looking to do on their own aside from what the players had put through with their intentions?
TODD DURBIN: Well, there were sort of two things. At one level we had this conversation with our teams and with ownership, and the designated player rule was the topic of discussion with respect to the union.
I leave it to them to comment in terms of you know, their reaction to the changes.
My sense is from having spoken to them, obviously they were aware of this before we announced it, that they are very supportive of it and are as excited about it as we are.
Question. Is there any concern with teams signing the three DPs, does that lower the talent pool?
TODD DURBIN: Potentially it could, but I think it’s really a function how much allocation money the team has and how they are building their roster and I can sort of envision two worlds. I can envision a world where you have three players at $335,000 and you are paying the remaining players on the team the salary that you are talking about and making it difficult for teams to compete.
I can also envision a world where teams have three players and $335,000 in the team to be quite competitive. You may buy a few players who are earning $200,000 down to 100,000. You may have one or two generations of players, someone like (LA Galaxy defender) Omar Gonzalez who came out and had a great year (in 2009).
I think it’s really just a function of how you manage your roster and build your team. I think depending on how you map it and build it is going to dictate whether you are successful or not. That’s why one of the things we are excited about is the flexibility that the teams will have to go out and be innovative and entrepreneurial in terms of trying to find the best way to get the best product on the field with their resources.
Question. You’ve increased the salary cap under the new CBA but you’ve added a number of designated players. So my question is: under the old CBA, what would…if you put the maximum number of players…how much money will you take off the cap and how much of the cap will be left for the existing players or the players who are already in the League; and now under the new rule if you take three designated players, what would the salary cap be even with an increased salary cap? How low would it be? Is it possible the salary cap is actually going to go down for existing players if you take the max numb number of DPs?
TODD DURBIN: I would have to actually run the numbers again. I don’t think so. It’s more complicated than that is really the answer to the question because in the past, your first DP had to be 18 percent of your salary budget and your second DP at $335,000, I believe was 14 1/2 percent of your salary budget, and so between the two of them, you were chewing up roughly 33 percent of your salary budget with respect to your players.
Question. 33 percent of 2.3, right? So what is it under the new rule? You take three guys and you subtract it from 2.5 million, that’s my question?
TODD DURBIN: Right. However, it’s more complicated than that because in the old world, you had no flexibility about what designated players were going to be charged against your salary budget because you could not use allocation money to buy down that charge, today you could have three on your roster all at a $150,000 (charge per player, or $450,000 total)