In 2016, when Weston McKennie signed his first professional contract with Bundesliga side Schalke 04, the move was celebrated in just about every corner of the U.S. except for Dallas and MLS headquarters in New York.
McKennie had been in the youth system of FC Dallas for seven years. As such, FCD did plenty to prepare McKennie for the professional ranks. And yet when McKennie signed with the Royal Blues, what did FC Dallas get for all its hard work? Not a cent, even though FIFA’s Regulations on the Status and Transfer of Players (RSTP) said FCD should have received around $250,000.
The reason why FCD was left empty handed was that for decades the U.S. Soccer Federation, for a variety of reasons, opted not to adhere to RSTP. When MLS was getting players from the college ranks, or on free transfers from abroad, this didn’t matter so much. But now that MLS was investing tens of millions of dollars every year in youth academies, it either wanted to see something in return for its investment or scare off foreign clubs from poaching their youth players and keep said prospects for themselves.
So in April of 2019, MLS announced that it would begin adhering to RSTP. In practical terms, the announcement meant that MLS teams would be compensated for player-development costs when an academy product signed their first pro contract with a foreign club (which would trigger what is called in FIFA parlance a payment of training compensation). It was a gift that could hypothetically keep on giving. If an MLS-developed player was ever transferred to a team in a different country, MLS and the team that developed the player could recoup as much as 5% of the transfer fee (called a solidarity payment). It would also pay foreign clubs such fees for incoming transfers.
It would be akin to a Japanese baseball team reimbursing the New York Yankees for player development costs if a Yankees farmhand decided to sign with the Japanese team instead of going to the Major Leagues. The Japanese team would also have to pay the player’s youth teams for such costs as well.
The announcement sparked visions of MLS teams not only hanging on to more of their academy products, but potentially recouping tens — if not hundreds — of thousands dollars if the player moved elsewhere. When DeAndre Yedlin was transferred from Seattle Sounders FC to Tottenham Hotspur in 2014 for a reported $4 million, that should have resulted in solidarity payments of $200,000 to the clubs that developed him. McKennie’s recent move to Juventus — if it reaches its maximum transfer fee of around $30m — could land FC Dallas as much as $600,000.
There was also hope that MLS’ decision would pave the way for non-MLS clubs throughout the country — be they in the USL or just local clubs — to obtain their FIFA-mandated fees as well if a player they developed hit it big. In a country where the pay-to-play system — whereby parents are footing a chunk of a club’s expenses — is still king, a couple of hundred grand could ease the financial burden on some clubs and families.
The decision has had some positive impacts. MLS has indeed been able to retain more of its youth players, at least the ones that it wants. But what has ensued is largely a two-tier system in which U.S. youth clubs that operate outside of MLS still struggle to get compensated.
“Nothing has changed for us,” said Jerome de Bontin, a former MLS executive and currently the chairman of youth club Rush Soccer. “There’s been no concrete materialization of [MLS’] decision.”
As for why it took so long for MLS to take part in RSTP, that is down largely to the stance of the U.S. Soccer Federation. Previously, the USSF prohibited U.S.-based teams from collecting or paying such fees. Among the reasons cited — which have shifted over time — was fear that adherence to RSTP would trigger anti-trust lawsuits due to restraint of trade, or violate child labor laws. The USSF also relied on some arcane legal rulings to avoid taking part in RSTP. Back in 1997, during a court case involving MLS and the MLS Players Association, the two sides agreed that MLS wouldn’t charge a transfer fee for out-of-contract players. The USSF agreed to do the same, yet feared that paying youth clubs a fee when a player signs their first pro contract would violate the agreement.
But after watching several of its academy products — most notably McKennie — leave for nothing due to the fact that they were not contracted with the MLS club, the attitude in league circles evolved. If the youth player was going to sign elsewhere, MLS wanted to capture the fees to which FIFA said it was entitled. The thinking of the USSF changed as well. Following a stakeholders meeting in 2015 that included MLS and the MLSPA, the USSF opted to take an officially neutral stance on the issue instead of openly opposing it.
So what has transpired since MLS’s announcement 16 months ago? According to Dimitrios Efstathiou, MLS EVP of Player Relations and Competition, only a handful of transfers of MLS players have triggered a payment of training compensation or solidarity payments. Efstathiou declined to say how much money MLS teams had recouped or which deals were involved, but he said it was less than $1m total.
That number doesn’t include D.C. United’s recent transfer of midfielder Chris Durkin to Belgian side St. Truiden for a reported $1.1 million. Efstathiou said the solidarity payment — in this case, the mandated 5% amounts to as much as $55,000 — was “baked into” the fee for Durkin, but he added that D.C. United technically wasn’t eligible for the payment. That’s because MLS decided that only those MLS academies that don’t charge players a fee in order to play can receive training compensation or solidarity payments. D.C. United is one of those that still charges a fee. Minnesota United, which recently revamped its academy structure, is the other.
All of that said, in the eyes of Efstathiou, the adherence to RSTP has still been a success for MLS.
“We put [RSTP adherence] into place actually to make sure that we were retaining the players that we wanted,” he said. “The reason why you haven’t seen that many examples of it is because we’ve been doing a really good job retaining our talent. Our focus isn’t to just go out and get money. Our focus is to retain the talent that we think will be a success in MLS.”
He added, “I expect that the number [of deals] will go up. As we continue to develop more and more talent, there will be instances where those players will gather more and more attention globally.”
The USSF’s neutral stance is driven by the fact that agents and the MLS Players Association are generally opposed to RSTP, the thinking being that it creates an additional tax on transfers that takes money out of the player’s pocket.
“The MLSPA strongly supports youth development, but we do not believe that placing the burden solely on players to fund it is a sensible approach,” the MLSPA said back when MLS announced it would follow RSTP. “A levy on professional clubs and/or the Federation that is unrelated to individual player transactions would spread that burden across the industry, which would be a far better approach to funding development.”
There is also concern that in some cases it could kill deals and limit player choice. A player looking to sign their first pro deal by heading to Germany on a modest $60,000-a-year contract might soon see the costs associated with the move quintuple in size if training compensation is applied. So rather than take a chance on an American player, a German club might prefer to look to someone from the European Union who is more familiar with the culture and will adapt quicker.
Efstathiou insists that MLS hasn’t stood in the way of any player attempting to move overseas if that’s where they wish to play.
“We feel very strongly that the idea is not just to go off and get potential dollars for anyone who touched our system,” he said. “It’s to get those dollars from the players that we actually had an active interest in turning into professionals. [Players we’re not interested in] still might become a professional at a lower division, in a different place with a different standard. And our interest is not to be a hindrance to that process.”
While MLS clubs have had success with RSTP, non-MLS youth clubs are still struggling for training compensation and solidarity payments. While the money involved might not seem like a lot in the context of player fees, it can help sustain these clubs by covering vital operating costs or increase available scholarships.
When Durkin’s transfer was finalized earlier this year, one of the youth clubs he played for, the Richmond Kickers Youth Club, didn’t get its cut of the fee estimated to be in the $10,000 to $20,000 range. Reached by telephone, the Kickers’ executive director, Leigh Cowlishaw, said the club would look into trying to get reimbursed.
But the USSF’s neutrality means that the Federation will merely pass along requests to FIFA for clubs to get paid, rather than be an advocate for a youth club that is ostensibly one of its members. That means youth clubs must hire an attorney to file paperwork and obtain a hearing with FIFA’s Dispute Resolution Chamber. That costs money and can take years to wind its way through FIFA’s bureaucracy.
Some clubs have pushed to be reimbursed anyway, and sources tell ESPN that a handful have been successful. Others have received nothing at all. The Dallas Texans sought to get reimbursed for transfers involving Clint Dempsey from Tottenham to Seattle in 2013. Sockers FC Chicago tried to do the same for transfers involving Michael Bradley when he moved from AS Roma to Toronto FC in 2014. Both cases went before the FIFA Dispute Resolution and were turned down.
“The definition of success is completely subjective,” said Cory Roth, a Houston-based attorney who has worked on several RSTP cases, including one involving Weston FC and current Philadelphia Union midfielder Alejandro Bedoya in 2016. “Some clubs are happy to receive enough money to provide scholarships for several players for a season, while other clubs will accept nothing less than the full amount owed under the RSTP. Many of my clients fall somewhere in between. It largely depends on the club’s willingness to be patient.”
A massive challenge facing non-MLS clubs, and one that undermined the efforts related to Dempsey and Bradley, is minimal or non-existent record keeping by the USSF. Article 7 of RSTP mandates that national associations are supposed to keep a player passport for each youth player. But in most cases the USSF doesn’t maintain them. Bradley’s player passport, a copy of which was obtained by ESPN, makes no mention of the youth teams he played for prior to turning professional, a massive inaccuracy. So even as FIFA is implementing a “clearinghouse” beginning January 2021 that would supposedly streamline the process and ensure that youth clubs receive the money mandated by RSTP, that wouldn’t be enough to overcome poor record keeping.
That issue is still present today. Lance Reich is an attorney who represented Redmond, Washington-based youth club Crossfire Premier in its bid to get solidarity payments from Yedlin’s transfer from Seattle to Tottenham.
“The records are there, it’s just that U.S. Soccer has never really done a good job of the administrative function they’re supposed to serve,” said Reich. “RSTP mandates that they keep these records, but they don’t. It’s crazy.”
Reich is representing Crossfire again its bid to get a solidarity payment for Henry Wingo’s transfer from the Sounders to Norwegian side Molde in August of 2019. Sources told ESPN that the amount is minuscule — around $5,000 — and according to Reich, Molde has in theory agreed to pay, but it won’t until accurate records related to Wingo are produced.
“I understand their point,” said Reich. “It would be negligent for them to just take our word for it.”
The USSF is in the process of constructing a national player registration database that will, when completed, allow for verification of a player’s club history. But due to the COVID-19 pandemic, the Federation’s focus has been on more pressing matters. In the meantime, non-MLS clubs are left with a steep hill to climb to collect the money that RSTP mandates; in Wingo’s case, state association records will not be enough to help the claim move forward.
When MLS made their announcement 16 months ago, the league said it would begin having discussions about a domestic system of training compensation and solidarity payments, so more money would flow from MLS teams to youth clubs that develop players. But those discussions have been shelved for a variety of reasons. With the coronavirus pandemic still raging, MLS’ cash flow has been severely impacted, dampening whatever impetus there might be to direct more money to youth clubs. The USSF Development Academy has also been shuttered, replaced by an MLS-run program. A U.S. Soccer spokesperson confirmed that “nothing has changed” in terms of creating such a system domestically. But Reich remains optimistic that the talks will resume when a sense of normalcy returns.
“You have to get everyone on the same page again, somehow,” he said. “MLS cannot service this entire country. It can’t. So how do you get talent in the four corners of our country spotted, identified and promoted so where our national landscape can see it? How are you going to have a system to incentivize that? Absent that, I can’t think of any other way. I think that realization will come. I think it will hit people.”
For now, the implementation of RSTP in the U.S. continues to benefit MLS and, with few exceptions, nobody else. It will be up to the USSF and MLS to change that, and that is unlikely to happen anytime soon.