Clint Dempsey: A Financial Decision for MLS

By now, if you haven’t heard of the biggest transfer into MLS since David Beckham then you are in some sort of self imposed internet and soccer popular culture lockdown (and I thank you for making Business of Soccer your first destination back).  More than likely though, not only have you heard of the transfer but you’ve read about it from multiple sources both before and after the official announcement.

The impact that this move makes for MLS is quite large and quite obvious.  Seattle Sounders FC have signed the USMNT Captain at a time in his career when he is arguably the most productive he has ever been and lured him from none other than the league dubbed “the most entertaining in the world.”

Opinion is divided on whether Clint Dempsey’s arrival will have a long term talent attraction impact or more of an immediate merchandising and ticket revenue boost for MLS and truthfully it is incredibly difficult to tell.   It does seem however like an overall good move for the league and it certainly is keeping MLS relevant.

This debate over the sporting and marketing aspect of the move has been discussed everywhere in one form or another, what has been revealed but not really touched upon yet is the impact of the method of his arrival, how he came to be an MLS player to be specific.

MLS maintains a single entity structure, meaning that as a whole, through a salary cap system and other mechanisms the league oversees rosters and trades and maintains control over contracts between teams and players as opposed to the owners.  This is done in an effort to stem bidding wars, inflated salaries and to maintain financial stability and revenue distribution.  The single entity structure of MLS has been the topic of discussion on many occasions and quite frankly it is how Clint Dempsey came to be a Seattle Sounders player.

Grant Wahl’s most recent “Planet Futbol” column over at Sports Illustrated proves to be an incredible primer on the timeline of events that lead to Clint Dempsey signing with Seattle.  In a nutshell, the league was notified that both parties necessary for the move to happen, Tottenham Hotspur and Clint Dempsey, had expressed interest in a move given the right price which began negotiations, phone calls and meetings that lead to the outcome we see today.  Those prices are precisely the details most important for Business of Soccer in this case.

Even though MLS acts as a single entity, they still have to approach player negotiations from outside MLS in the same two-pronged way as a normal club does.  First a fee must be negotiated between the two clubs, in this case MLS and Tottenham.  As mentioned above, a willingness had been shown by Tottenham to agree a fee for Dempsey and this fee is the first price in the equation.

Without going too deep, transfer fees are often times incredibly over simplified in terms of how the valuation comes about but much has to do with past production, capability and potential of future production, as well as the player’s current contract in terms of weekly wage and how much time is left to run on it.  In the end, according to Grant Wahl and SI, a round figure of $9 million was agreed as a proper fee.

The next step after agreeing a fee is drafting a contract with details and aspects amenable to the player at his potential new club, this is the second price mentioned above.  Now, a big deal was made of the fact that as a former MLS player and US National Team member Dempsey should’ve gone into the allocation process thereby giving Seattle’s cascadia rivals Portland an opportunity at Dempsey since they’re first up with Seattle in second.  The league countered this by stating as a Designated Player signing Dempsey was exempt from the allocation process indicating he could sign with whomever he saw fit and Seattle was that club.

Back to the price at hand, for simplicity’s sake this will just be assessed by what Dempsey is being paid and that same SI article details Dempsey’s total pay at $24 million over three and a half years.  This is apparently covered by the owners of Seattle Sounders FC Joe Roth, Adrian Hannauer and other minority investors.

Some may argue this is massively over paying, from a neutral point of view I can only quote HBO’s Will McAvoy, “Some people say I’m overpaid, I’m not, I’m paid what the market will bear which means I’m paid what I’m worth.”

The significance of the owners footing the wage bill for Dempsey is that immediately after that revelation by Grant Wahl from a source close to the negotiations, he also reveals that MLS is footing the $9 million transfer fee.

Personally the transfer fee, specifically who paid it, is the biggest deal in this whole situation.  When looking at the history of major player transfers to MLS, the total expenditure in transfer fees makes Arsenal FC look like Gordon Gekko.  Dempsey is by far the most expensive signing at $9 million with the closest competitor being Robbie Keane at $5.2 million, interestingly enough form Spurs as well, followed by Landon Donovan at around $1.35 million when he moved from Leverkusen to Galaxy and roughly $1 million for Tim Cahill in his move to the New York Red Bulls from Everton.  In fact, two of MLS’s biggest signings, David Beckham and Thierry Henry, were free transfers having run out their contracts at Real Madrid and Barcelona respectively before their moves.

MLS prefers to do business this way, austerity and keeping overall expenditure low is clearly a priority.  Oddly enough the league stresses precedent as the reasoning behind why Dempsey did not go through the allocation process citing the major DP signings mentioned above, and Claudio Reyna, yet no precedent exists for the league paying a full transfer fee, especially not for a Designated Player.

Clint Dempsey coming to MLS is a huge deal.  Wherever you fall in the debate surrounding what his long term impact will be, no one denies that his move is an overall positive one for the league or that his presence raises the profile.There is no indication however, in any previous major DP signing announcements that the league subsidized a part or whole of any transfer fee.

It should be noted that Grant Wahl’s source is unnamed and the league “disputed that characterization”, referring to Wahl’s reference to the league “covering” the fee.  Technically that is not a categorical denial form the league about paying the fee, just that they wouldn’t call it “covering”.  Whatever they want to call it, MLS negotiated a player transfer, paid the agreed upon fee and effectively gave that player to Seattle to hash out personal terms.

MLS is in a state of incredible growth and expansion and Clint Dempsey’s deal follows that trend.  Whether or not the other unprecedented aspect of the USMNT Captain’s signing will have reverberations around the league is yet to be determined, but it is certainly a detail that could be argued now establishes a precedent.

Reporting on the business side of the world's game.