All MLS clubs need to operate within the confines of the salary cap, and back in 2007 that cap was just $2 million for the entire team.
This wasn’t a huge problem for most clubs, but when LA Galaxy made contact with David Beckham, it was something of a stumbling block. Golden Balls, as he was affectionately known, was being paid almost $20 million a year in Spain, and although he was happy to significantly reduce his wages to move to the US, it would take a lot more than $2 million to get him there.
Everyone knew his presence in American soccer would do wonders for the league though, so MLS came up with a solution to get the deal over the line.
That solution was the designated player rule (DP rule).
Originally it allowed each team to sign one player whose wages would only partially count towards the team’s salary cap. In effect, it meant each MLS club could sign a global superstar if they could afford it. Beckham ended up signing for around $6.4 million a year, so you can imagine how little of that was accounted for within the salary cap.
A little known fact is that Beckham had a clause written into his contract, that after he retired he could buy an expansion club for $23 million. At the time this felt like a great deal for MLS, since the cost to join the league back then was around $8 million. But Beckham must have suspected his presence would increase the league’s popularity, and he was right. Beckham is part owner of Inter Miami who joined the league in 2018, and by 2024 the cost to buy in was around $500 million.
None of this would have happened without the designated player rule though. While Beckham was the catalyst, many other superstars of soccer have been able to join the league via this route since, and all of them have done their bit to keep MLS in the headlines and so increase the league’s global popularity and reach.
How Does it Work?
The designated player has developed a little bit since 2007.
Initially it was restricted to one player per team, but that has now been expanded to three players per team. This is why it was possible for the likes of Lionel Messi, Sergio Busquets and Leonardo Camparna to all play for Inter Miami at the same time in the 2024 season, for example.
The salary cap has increased since 2007 too of course, but even so, not by enough to allow for the sorts of wages elite players from Europe demand, so the DP rule is still very much necessary.
The salary cap rules dictate that no player can be paid more than a specific wage (in 2024 it was $683,750 but it wil change over time), and the combined value of all first team player’s wages cannot surpass the salary cap.
When a club signs designated players, only the first $683,750 of their salary counts towards the cap. So the club can spend whatever they like on their designated players so long as they can afford it. There is no expiration date either, so a player can remain designated for as long as they want to stay and the club wants to keep them.
This allows the club and therefore the league to attract better talent, which in turn improves the league and makes it more interesting for a global audience. The end result is that MLS grows in quality and reputation.
Targeted Allocation Money (TAM)
One additional element here is targeted allocation money.
The best way I have heard this described is like fairground money.
You know those plastic tokens you buy to go on rides at the fairground? They have value inside the fairground but are completely worthless once you leave. Targeted Allocation Money is basically like that. It’s real cash, but it can only be spent on specific things within MLS.
Each club has a set amount of TAM per season, but it can only be spent to ‘buy down’ a designated player’s salary. What this actually means is more than 3 designated players can be brought in, but one of them isn’t given that status.
This is how Inter Miami were able to add Luis Suarez to their roster when they already had the 3 designated players mentioned above. They only pay him $200k a year from their regular salary bill, the rest comes from targeted allocation money. In 2024 each team got $2.4 million in TAM, so Suarez could be getting all of that on top of his official salary of $200k.
Impact on MLS
You only have to look at some of the players who have graced MLS since the designated player rule came in to understand its impact.
Here are just a few, not including those already mentioned earlier in this article:
- Thierry Henry
- Robbie Keane
- David Villa
- Bastien Schweinsteiger
- Denilson
- Wayne Rooney
- Steven Gerrard
- Gareth Bale
- Frank Lampard
- Zlatan Ibrahimovic
- Javier Hernandez
- Olivier Giroud
- Didier Drogba
- Kaka
- Nani
- Freddie Ljungberg
These are some of the most decorated soccer players in recent times – there are World Cup winners in that list.
The benefit of having that sort of quality in the league is immeasurable, but we can say with certainty that it boosted the overall quality of play not to mention inspiring thousands of young Americans to take up soccer. Some of those kids will have gone on to be professionals themselves, so the home grown talent pool will have expanded massively since the DP rule came in.
In terms of the league itself, MLS has more than doubled in size since then, going from 13 teams in 2007 to 29 in 2024, and more on the way. This is because people with money could see there was more money to be made by getting involved and making that initial investment. Big name players who create exciting soccer attract attention, and advertisers love attention.
MLS is thought to be worth around $20 billion today, whereas in 2007 its value was somewhere around $400-$500 million. That’s quite the journey in under 20 years, and there’s not a chance in hell this would have been achieved without the designated player rule.