RSL 1010: What makes MLS weird? Single-entity creates dizzying effects

Twenty-one years into the league, and Major League Soccer is still one of the most interesting professional leagues in the world. With it tipping the scales on the weird chart, many first year and foreign coaches often find it increasingly hard to navigate. This trend is not reserved for coaches alone as many fans also find themselves wondering, ‘how does this work?’

Behind the closed doors, the smoke and mirrors, MLS is primarily a single-entity business. That means that while each club has its distinct identity, they are all owned by the MLS. Think of it as one big corporate conglomerate and each club as a subsidiary through owner-operator contracts.

Confused yet?

To put it another way, each club is a single piece of the business puzzle. This is much different from foreign soccer leagues such as the English Premier League, for instance, as both Arsenal and Chelsea are considered different legal entities and not owned by the league.

RSL 1010 (2015): What makes MLS so weird?

The single-entity effect

Much like a butterfly flapping its wings that changes the wind, which in turn changes the weather and so forth, the single-entity effect is profound on the league. Among the largest effect was the creation of a salary cap. This cap was meant preserve competition within the league – not letting a single club grow too powerful as seen in foreign leagues – but in doing so, as the league has grown, certain initiatives (exceptions) have had to be created. These include Designated Players (DP), Generation Adidas (GA), Homegrown Players (HGP), all of which limit the influence of players on the salary cap in order to cultivate greater competition and the next generation of professional players.

The single-entity system has also created a need for "allocation". If you follow the MLS at all, there is no doubt you have heard the term, but what does it mean in the context of the league? In the simplest terms, allocation is the process through which commodities (player rights, money, etc.) are dispersed to individual clubs. As a single-entity business, allocation helps address the individual needs of a team in order to keep the league competitive.

Consequently, the addition of allocation money under the guise of TAM (Targeted Allocation Money) and GAM (General Allocation Money) has begun to become more of a common sight when following the league. Like the aforementioned initiatives, MLS introduced a system of allocation money in hopes of creating a more flexible salary cap.

Allocation money is received, usually, on the basis of need — i.e., finishing lower in the standings and competing in continental (CONCACAF) tournaments results in additional allocation money for the club. This does not mean, however, that it is the only way to receive it though. Targeted allocation money, for instance, is a new term used by the league to describe its $37 million investment in player compensation — or $500,000 more per team per year — for the next four years. Allocation money, just like any other commodity is also mobile, meaning it can be traded. Therefore, a club can received GAM in player, allocation order, draft pick, or even roster slot trades to name a few.

RSL 1010 (2015): Understanding the intricacies of the MLS allocation system

So, what is allocation money?

Well, basically, instead of simply increasing the now $3.49 million per team salary cap, the league introduced this system to make some of the salary cap mobile (tradable) in essence. This means that clubs that spend less of their allocation money can trade it to other teams that need it in return for desired value. This is basically a result of the single-entity effect manifesting as the MLS being micromanaging of its clubs because they could have simply increased the salary cap with the same effect.

Another difference between MLS and foreign leagues is a lack of merit-based promotion and relegation. With the exception of other franchising leagues such as the Australian A-League, a MLS franchise could not be relegated (transferred) to a lower division and, similarly, a lower division franchise could not be promoted (transferred) to MLS because the leagues are different companies.

---

Without getting too much into the nitty-gritty, those are some of the eccentricities of the MLS.

So why does the league have such complex systems in place?

There is no concrete way of determining this, as the league is much like the mafia. Behind closed doors and in secret meetings, everything from the clandestine transactions of the allocation rankings, to the apparently embezzlement accounting of the allocation money mechanism is keep secret with the simple and repetitive words of "per league policy, the details were not disclosed."

For fans of the league this system is both blessing and a curse. It lets the clubs we love so desperately continue to operate but gives us little information about how any decisions are made. With even a brief sneak peek behind the curtained world of the MLS, the league will remain an enigma.

We'd like to know what you think. Do you think that there is a characteristic of the MLS that we missed? Are there aspects of MLS that we overlooked? What do you think makes Major League Soccer unique/weird? Share your opinions in the comments section below.