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The Union want to be a selling club.
They’ve invested heavily in their Academy over the years and that investment is beginning to bear fruit. The team count 19 players who have come from their junior ranks and ended up on professional sides, both domestically and abroad.
However, in this process of selling players there seems to be a big blind spot in the conversation from both the team and fans alike.
Buying low
An investment in Academy development is a lot like traditional venture capitalism: an individual or a group of investors buys a stake in a lot of interesting, inexpensive, and burgeoning companies in hopes that one or two of them make it big. Though the investors will lose money on almost all of their individual investments (since the overwhelming number of companies that are birthed into existence fail), the winners from the group will be valuable enough to more than offset the group’s initial pot and produce a handsome return in the end. The investors can take their winnings home, or reinvest them and repeat the process.
Should the reader replace “individual investments” with “young soccer players,” the system is identical for the Union.
Money can be made through the venture capital model of course and clubs like Ajax in Holland are a great example. Money can also be made through perhaps the oldest model of investing that exists: going out into the marketplace, buying things with a low value, and then selling them later should their value increase.
Buying low and selling high.
In the conversation about how the Union might add greater profitability to their business model, few people seem to be talking about this option.
Selling high
The list of Union players not acquired from the team’s Academy is of course a long one. On that list, however, are some interesting opportunities for the team to cash in.
Author’s note: Players are listed with their most recent valuations according to transfermarkt.us. The arrow after their values represents the trend of the current valuation with respect to the prior. For a primer on how MLS treats outgoing transfers these days, the details are three quarters of the way down this page.
Kacper Pryzbylko – $513,000 ↑
The Union just extended the contract of the 26 year old German and Polish striker, a well-earned reward for a solid season. He arrived in 2018 when his market value was $349,000, though the Union signed him for free, and is “in the money” for the Boys in Blue a cool $164,000. Not bad for less than a year’s worth of work.
Kai Wagner – $570,000 ↑
Whatever the Union paid in February for the German left back (his transfer fee remains undisclosed), they have been rewarded. Arguably the best left-sided defender in MLS, Wagner is a force to be reckoned with on both sides of the ball and has increased his market value by $203,000 in less than a year’s time. As Matt Real has reportedly had his best month of training, the Union seem poised to profit should Wagner want a move back east.
Fafa Picault – $855,000 ↑
Picault and the next player on this list, Ray Gaddis, have a lot in common: they both seem to polarize Union fans. Each has made himself useful in spite of the team’s switch from a 4-2-3-1 to a 4-4-2 diamond, and that’s a credit to their talents and adaptability (neither is a natural fit for the new system). Picault is worth more than he’s ever been, and $399,000 more than when the Union plucked him from St. Pauli. A man of the world, Picault would find a niche whether he ended up back in Italy where his professional career began or with expansion side Inter Miami.
Ray Gaddis – $912,000 ↑
Ray Gaddis is the original draft gem, a second round pick in 2012 that has been a Union stalwart ever since. The former two-time All Big East defender will probably never wear another soccer shirt than the blue to which he’s become so accustomed, but he may never be worth more than he is today. Either way, expect his name in the Ring of Honor in 2050 when he finally retires.
Jack Elliott – $1,430,000 ↑
The team’s best defender and former 4th round draft pick is a regular on Major League Soccer’s Team of the Week. He also carries a European passport (ed. note: at least until Brexit), making any transfer abroad that much easier. The Union acquired him for nothing and would earn a tidy sum for finding him an international home.
Andre Blake – $1,710,000 →
The Union traded up for the Jamaican goalkeeper in the 2014 draft, making him the first net-minder drafted first overall in league history. He’s been an MLS All-Star since and routinely comes up in the conversation about players the Union could sell. The low standing of the Jamaican national team limits the list of potential destinations however.
Marco Fabian – $2,280,000 ↓
The Union grabbed the Mexican midfielder for free from his club in Germany, the latter knowing they needed to make a move for some value before Fabian could have left for nothing. Baked into the deal is the Union’s ability to keep Fabian around for two more years and, should they sell him, only owe Frankfurt 5% of the team’s cut. Though his value is falling, the Union could still profit from selling Fabian this off-season with some savvy deal-making (and his hometown club, Chivas Guadelajara are reportedly interested). Certainly Ernst Tanner can figure out how.
Summary
The Union have actually employed this strategy in the past year, albeit sparingly, off-loading Derrick Jones for $175,000 and Keegan Rosenberry for between $300,000 and $400,000. Both of those deals had pros and cons, though it’s hard to argue with the former’s need for greener pastures and the manner in which the cash from the trade of the latter contributed to the team’s upgraded roster overall.
In order to be a selling club however, those sums need to be small potatoes to what might come next.
One thing that must be said is that the numbers for Jones and Rosenberry were in MLS funny money which somewhat restricts how it can be used/reinvested. This would likely be true for most other transfers within MLS at least for the near future. To maximize flexibility, ideally the Union would sell to other leagues and collect *real* transfer fees.
This is true to an extent. Yes, MLS Monopoly money can only be spent on player salaries, but 100% of it can be spent on 1st team player salaries. If you sell a player abroad, you may only get to keep as little as 2/3 of it (the rest gets distributed around the league), and only a smaller portion of the amount you do keep is converted to GAM and can be spent on player salaries. The big exception to this is that there’s no limit to the amount that can be spent on DP’s, but that is only 3 players on the roster, and while they may work out spectacularly (see LAFC and ATL), they could also be a spectacular failure (see Chicago and Toronto before the Giovinco era).
https://www.mlssoccer.com/league/official-rules/mls-roster-rules-and-regulations
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The club keeps 3/4s of non-homegrown transfers that are not GA or draft pick (then there is a gradient depending on years of service) but the club keeps 100% of homegrown transfers. So if the main mechanism planned is to develop homegrown players ideally by selling overseas, you get 100% of the fee and can use that to invest back into the academy as well as other organizational upgrades along with other player salaries.
https://www.mlssoccer.com/league/official-rules/mls-roster-rules-and-regulations
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Section “Transfer and Loan Fees”
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Clubs get 3/4 of the transfer fee for any player not a Homegrown, GA, or player from the SuperDraft. GA and players from the draft have a gradient pay scale based on years in the league. Clubs get 100% of the transfer fee of a Homegrown.
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Of the collected transfer fee, up to 750k can be converted to GAM (which can be used or traded and the amount converted is determined by the club) while the remaining can be used toward DPs or invested into the youth system, facilities, etc.
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Given Sugarman’s Waterloo quote, money toward top-end talent to compete for silverware is not coming from his wallet so it needs to come from somewhere else. This is a way to do just that AND have funds to reinvest into the business model (youth development, facilities, etc) to sustain it. GAM and TAM will come from the league every year to fill out the roster. You don’t avoid taking a risk on a DP failing, getting them right is what you pay Tanner for.
It’s difficult to read this article and not fly right into hypotheticals, or discuss players who will/will not/may/may not move. I think you wrote this purely from a “Player Value” perspective. And I greatly appreciate that!
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I am intrigued, however, by this one hypothetical: What if this is just a Magic Carpet Ride of a season? What if they are all still here in March and we have a typical Union season next year? Would the values drop considerably? Or are they likely to remain around these levels with the idea that this year represents what they are capable of achieving?
(Like I said…hard to avoid the hypothetical!)
It seems like the newest guys have seen their values go up, which might be partly because of their work and partly because of the rising tide of the team. But guys like Ray, Fafa, and Elliott have more than just this season under their belts and are still trending upward. I don’t have a causation to that, just that it’s uncorrelated with too much team success.