MLS History: The Beckham Rule and the rise of the designated player

In the years to come when someone is chronicling the decisive history of Major League Soccer, 2007 will almost certainly be at the forefront of all change and, at least so far, success.

There have been 136 designated players in the league over the last ten years and there are currently 42 players with that classification going into the 2017 season. Moreover, less than two months into the new year and six are preparing for their first season in the league.

In 2007, MLS adopted the Designated Player (DP) rule in an effort to compete and attract World-Class players in the international market. The rule was designed to allow clubs to sign players whose wage or transfer fee would otherwise exceed the league maximum salary and, in some cases, the club’s salary cap. So, in essence, the rule allows clubs financial flexibility while also retaining the discipline of the salary cap.

Of course, there are those who use catchy expressions to coin neologisms, thus the rule is colloquially referred to as the “Beckham Rule.”

Photo by Victor Decolongon/Getty Images

In anticipation of the Los Angeles Galaxy pursuing the English and Real Madrid star David Beckham, league officials realized there was no tenet that would allow MLS franchises to attract internationally recognized players of Beckham’s caliber. As a result, MLS adopted the rule as part of the salary cap regulations for the 2007 season that required clubs to adhere to a player salary cap that hovered just north of a modest $2M a season.

The "Beckham Rule" is a mechanism that assigned the maximum budget charge – $400,000 in 2007 and $480,625 for 2017 – against the club’s salary cap with the additional salary being the sole responsibility of the team owner. Each franchise was originally allocated one Designated Player slot on their roster which could be traded, however, in 2010, the number of DP slots were increased by one – two if a $250,000 luxury tax was paid to the league each year – and became affixed (non-tradable).

To provides some perspective here, prior to the 2007 season, only three MLS players earned in excess of $400,000 a season. Those players were Landon Donovan, Carlos Ruiz, and Eddie Johnson, all of whom were exempt from the rule until 2010.

During the first season of the DP rule, only the New York Red Bulls (Claudio Reyna), the Chicago Fire (Cuauhtemoc Blanco) and FC Dallas (Denilson) followed suit with LA signing designated players. In fact, of the first four designated players, half of them were flops. Reyna’s injuries sidelined the 33 year-old for most of his one and a half seasons with New York. Denilson, by comparison, is easily the worst DP of all time. During his entire time with Dallas, the Brazilian “star” contributed a single goal, on a penalty no less.

Nearly ten years later and the team salary cap is now a little over $3.8 million and the “Beckham Rule” is on its third iteration. Designated players are now assigned $350,000 against the cap and their is an option to sign Young Designated Players 23 years-old and younger. After clubs expressed concerns about signing young international players that they desired to develop, the league instituted this change to facilitate budget concerns. These players not only have a lower salary cap hit ($200,000 maximum), but they are allowed to sign a young designated player with their third DP slot without playing the luxury tax.

Photo by Dean Mouhtaropoulos/Getty Images

Albert Rusnak was signed using the Young Designated Player mechanism.

With the MLS pumping more money into the league than ever before, it begs to question what kind of effect has the “Beckham Rule” had on the league?

While some argue that the admission of the Designated Players in the league has amplified competition and raised the overall level of play, others are more skeptical. The rule has made the league less fiscally motivated, but with 81 percent of DPs in 2017 being foreign, is the league forgetting the natural progression to develop domestic talent?

The $3.8M question remains, however, does the DP rule tend to favor large-market teams, or at least those franchises that have higher levels of revenue (deep pockets) that can afford to pay for the best players?

As with so many other things the answers to these questions probably depends on your vantage point - whether you are a designated player making a median $1,882,393.00 or the average MLS player making $117,000.00.

No matter where you stand on these issues, one thing is clear, the “Beckham Rule” has had an undeniable effect on Major League Soccer.

MLS is a young league that is gaining a strong foothold in the the North American market. The ability to sign high-priced soccer talent through the introduction of the Designated Player Rule has, without a doubt, helped the league in its efforts to market the professional game. During the 2007 regular season alone, one study found that David Beckham doubled the ticket sales for the MLS matches in which he played.

The unique structure of MLS sets up an interesting dilemma for the league and teams; individual franchises are likely focused on the relationship between winning and attendance, while the league is more than likely focused on growing revenues. Therefore, the dangerous of increased salary inequality must be weighed against improved match day performances and talent. How MLS deals with these conflicting priorities through utilization of the “Beckham Rule” will inevitably influence the league’s priority to become “one of the top five leagues in the world.”