January 16, 2017
Five years ago, former Union CEO Nick Sakiewicz was taking part in the press conference that reintroduced Sebastien Le Toux as a Philadelphia player.
Le Toux, who was unceremoniously dumped by ex-manager Peter Nowak one year prior, had just been acquired from the New York Red Bulls in exchange for forward Josue Martinez and allocation money, the latter of which became a sidebar topic during the presser.
"Just so everyone knows, allocation money is just money," Sakiewicz said, unprompted. "Allocation money is a technical term that (MLS Executive VP) Todd Durbin uses as a rule in the league. It's cash."
That quote was unexpected but appreciated. Sakiewicz dropped the information with a touch of jest, almost as if he agreed with the consensus thought that the mechanism was unnecessarily obscure.
"Allocation money," in layman's terms, is cash that can be used for signings and trades, and also to buy down player salary. In 2015, MLS added "targeted allocation money," which is a separate amount of cash that teams can spend to "invest in their roster outside of the player salary budget."
There are two forms of allocation money that currently exist, "general" and "targeted," which we abbreviate as GAM and TAM.
Anyway, going back to that Le Toux trade, we have no idea how much money the Union actually paid New York. Did Philly send $50,000 to Red Bull? Was it $100,000?
We don't know because MLS never released dollar amounts in transactions involving allocation money. A player could simply be traded for "allocation money" and that's all the information we received. It was impossible to determine how much cash a team actually had unless a reporter was able to dig up information that was not made public.
Other things we know nothing about are contract lengths and transfer fees. The Union even signed a guy last year, Kevin Kratz, who apparently was never supposed to be a Union player in the first place. He was traded to Atlanta in December after logging zero minutes in Philadelphia.
A lot of the fogginess with these mechanisms is the result of MLS being a single-entity league that experienced slow, but steady growth over the last ten to twelve years. A careful and measured approach meant that information regarding player acquisition was generally protected. There was no form of free agency and player contracts were controlled by the league, not their individual teams.
Ever since David Beckham's arrival in 2007, that slow growth has given way to an explosion of new fans, new teams, and new stadiums, but archaic mechanisms like "allocation money" have remained in place. Advancements in that department are simply incongruent with the growth we've seen in other areas.
So, it was a rather stunning development this past weekend when MLS, without telling anybody, began revealing allocation money dollar amounts in all transactions, starting with the 2017 SuperDraft.
Because of that, we know that the Union paid $50,000 in "2018 general allocation money" to trade up and acquire Marcus Epps in round two of the draft. We know that New York City FC paid $250,000 in allocation to get into the third spot and select Jonathan Lewis. We know that Houston dealt the fourth overall pick to Portland for $100,000 and other considerations.
The best thing about transparency with allocation money is that we now have a more competitive market inside the league. Without public dollar amounts, we never knew how much a player was truly valued, or how much a certain draft position was valued, or how much worth was applied to other considerations, like international roster slots.
Now we have a precedent.
New York City valued that third overall pick at $250k. Maybe another team leverages that in 2018 for a similar dollar amount. A.J. DeLaGarza was traded for $175,000 in combined allocation money. Does that mean that Steven Beitashour is worth at least $200,000? How about Keegan Rosenberry or R.J. Allen? We now have a burgeoning barometer for player worth.
We're getting into "four major sports" territory here, which is where we need to be. For instance, if Andrew Luck signs a contract for $25 million per year, then what is Aaron Rodgers' value? The Luck contract sets a market standard for other quarterbacks. If Yoenis Cespedes is worth $23 million per year, then how much can Jason Heyward get in free agency? How does a Vladimir Tarasenko contract extension affect negotiations with Nikita Kucherov? You get the point.
The MLS Players Union releases salary information twice a year, and now we can combine that data with transparency in allocation money to further our understanding of how teams really value players.
Front office members, technical staffs, agents, media, and everybody else now has another tool in player valuation, which will help in the creation of a self-guiding, if still limited, market. When the next collective bargaining session begins in four years, we'll also move forward with these entry-level free agency rules, which gets use even closer to finally giving players full control over their rights
The transparency is excellent, but it looks like the past is the past. I don't think we'll ever know how Union deals from 2010 to 2016 really went down. There will never be a legitimate way to evaluate any prior deal involving allocation money, and there were a lot of them.
As a simple exercise, here's one deal per season that the Union made involving allocation money.
We have no idea how much money actually changed hands.
Signed Jay Simpson using targeted allocation money
Traded targeted and general allocation money to New England for Charlie Davies
Traded Andrew Wenger and Cristian Maidan to Houston for a first-round draft pick, targeted allocation money, and general allocation money
Traded allocation money to Chicago Fire for Austin Berry
Traded Gabriel Farfan to Chivas USA for a first-round draft pick and allocation money
Traded Danny Califf to Chivas USA for Michael Lahoud and allocation money
Traded Jordan Harvey to Vancouver for allocation money
Traded Shavar Thomas to Kansas City for two second-round draft picks and allocation money
How can you properly evaluate a deal when you don't know the involved dollar amounts?
We couldn't. We would take a stab at a ballpark figure or try to pry the information out of sources, but most of the time media and fans would be left in the dark.
That resulted in incomplete opinions.
We do know, for instance, that Philly eventually turned that Farfan trade into the Andre Blake draft pick, but how much allocation money was involved? How much cash did Peter Nowak get for trading his starting left back in the middle of a playoff season? How much TAM and GAM were Andrew Wenger and Cristian Maidana worth?
I think MLS missed a PR opportunity when they started announcing allocation amounts without any kind of forewarning or press release. Bottom line, however, is that the league deserves a lot of credit for taking a huge step forward in the transparency department.