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MLS Transfer rules, many ways to cut the pie

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With Giancarlo Gonzalez almost certain to transfer to Palermo, a look at how transfer fees work in MLS.

Tullio M. Puglia

If Gonzalez leaves, that leaves several big questions unanswered. Who will take his place on the field is probably foremost, but the other is what do the Crew get out of it.

MLS transfers are confusing. The league owns all of the contracts and final approval goes through them. The individual teams play a large role in transfers. If a bid comes, they can certainly decline until their asking price is met. MLS of course can step in and they can force a sale - or nix one. It appears however that Giancarlo Gonzalez's sale will be going through. There are reports that he's agreed to a four year contract with Palermo and the Crew have a press conference scheduled before tonight's game against Houston addressing the Gonzalez situation.

After consulting with several sources, I have come to an understanding of the MLS transfer process. As with any MLS process, there can be undisclosed wrinkles to these rules, but this is a similar process that has been used in other recent transfers.

The first cut of the transfer goes to cover any contractual fees. This may include "sell-on fees" that go to prior clubs. This would include Vålerenga in Gonzalez's case. Next part goes to cover any fees MLS paid to get the player in the league. Finally, a third of the remaining total goes to MLS and two-thirds goes to the team. Of the two-thirds that come back to the club, only $650,000 comes back as an allocation that can be used for player signings, cap relief, or trades. The rest goes into team operations. That split changes to 25%/75% in the case of Homegrown players.

Lets run through an example using sample numbers. The Crew purchase a player for $500,000 and there is a 10% sell on clause in the contract. Now the player is a hot property after developing and a strong season and a bid comes with an offer that the league and the Crew can't refuse, say $5,000,000.

Of that $5,000,000, it's broken down five ways between MLS, the Crew, and his previous team.

Amount Recipient (Reason)
$500,000 Previous Team (10% sell-on clause)
$500,000 MLS (for original fee paid)
$1,333,333.33 MLS (A third of the remaining fee goes to the league by league rules)
$650,000 Crew (Max allocation amount, part of the Crew's 2/3rds)
$2,016,666.66 Crew (Remaining amount goes to non-player operations, the other part of the 2/3rds)

Remember, all of these numbers are examples based on little else than they are easy to calculate. This deal won't give the team extensive salary cap relief or player purchases in the league as only $650,000 comes back as an allocation. The remainder can fund the non-salary items. Training center upgrades, bigger ad budget, or even back into the owner's pocket.