Why Do They Like Us So Much?

Texan McKinze Gaines, in action for German club, Wolsburg (image/kicker.de)

Through the first 10 months of 2018, a record 20 American youth soccer players have signed with European clubs. At first glance, this development seems logical. Europe is home to the world’s best leagues and biggest clubs. So of course, as the talent level in the United States rises, more players would go to Europe.

But the reality is more nuanced.

The American youth signings fit a distinct pattern — one that has not applied as often to players from other non-European countries. In all cases, the American players were not professionals, and the clubs did not pay transfer fees for them. Further, in all but two cases, the player began on one of his new club’s youth teams, with his prospects of a first team place uncertain.

In general, signings from other non-European countries have been less frequent and lacked the sameness of their American counterparts. For instance, some players may be established professionals, require transfer fees, or both.

The reason for the Americans’ divergent path may lie in the type of transfer that brings most of them to Europe. These transfers are marked by three characteristics:

(1) Prior to signing with the new club, the player is not a professional.

(2) The player moves from a club outside Europe to a club within Europe.

(3) The player is not subject to a transfer fee.

(For convenience, I will call these “foreign youth transfers.”)

The data shows that Americans are unusually popular targets for foreign youth transfers. Germany — American youths’ most common destination— is a good example. In 2018, German clubs have signed nine Americans on foreign youth transfers. This does not include three players, whose moves to German clubs are not yet official, and another on a season-long loan. For all other non-European countries, the number is eight — over the last five years.

So why have foreign youth transfers become uniquely American?

The evidence suggests it is a blend of law and economics.

Clubs are reluctant to spend on non-first team players

European clubs are reluctant to pay transfer fees for non-first team players. For example, during the last transfer window, Manchester City, Paris St. Germain, Arsenal, Borussia Dortmund and Tottenham, big clubs all, devoted a combined $0 to that expense. Three other large clubs — Manchester United, Bayern Munich and Liverpool — purchased only one player and, each time, for less than $500,000.

Nonetheless, even when the player moves on a free transfer, certain situations could require his new club to pay training compensation. (Training compensation is explained here and here). Depending on the circumstances, this can be as much as, or more than, a transfer fee.

But there are two situations where training compensation is unlikely to apply: (1) the player moves from one European country to another; and (2) the player moves from the United States to a foreign country.

First, when a player moves from one European country to another, FIFA regulations only allow his former club to collect training compensation if it offered the player a contract or otherwise “justif[ies] that [it] is entitled to such compensation.” Justifying training compensation can be difficult. According to FIFA’s Dispute Resolution Chamber, it requires the former club to demonstrate a “bona fide interest” in the player. More specifically, the club must show “a proactive attitude vis-a-vi the respective player, so as to clearly manifest that the club plans to count on the player for the future.” The DRC notes that these cases are “limited to very exceptional circumstances.”

Last November, the DRC rejected Belgian club Genk’s attempt to win compensation for Indy Boonen, who’d left its academy at 16 to sign with Manchester United. To support its claim, Genk introduced player evaluations that praised Boonen, calling him “outstanding” and “the leading player” in his age group. But the evaluations stopped short of declaring Boonen had a role in Genk’s team “for the future.” Based on that, the DRC concluded Genk did not demonstrate a “bona fide interest” and, therefore, ManU did not owe Genk training compensation.

All this shows that, most likely, when a European club signs a youth player from a different European country, it will not have to pay training compensation. Clubs act accordingly, signing youth players from other European countries far more often than non-European players. The benefit of this is clear: European players can represent a risk-free investment that players from non-European countries often do not.

Second, American youths also represent a risk-free investment because the United States does not participate in training compensation. Thus, signing an American, as opposed to a player from any other non-European country, could save a European club a hefty payment.

Consider the following: In 2016, Austin, Texas native McKinze Gaines signed with German club Wolfsburg, where he began on the club’s U19 team. Wolfsburg did not pay a transfer fee or training compensation for Gaines. Essentially, he cost them nothing but a small salary they might have paid someone else anyway.

But Wolfsburg may have evaluated the move differently if US clubs partook in training compensation. To determine the amount of compensation, FIFA rules apply a formula. Without digging too far into the specifics, the amount varies based on the years the former club registered the player. Payments for ages 12 through 15 are relatively low. After that, they escalate based on the status of the player’s new club.

Gaines was registered with Austin-based Lonestar SC from age 12 through most of his 17th year. So for Gaines’ age 12 season through his age 15 season, Wolfsburg would owe Lonestar EUR10,000 per season (approximately $11,500). For Gaines’ age 16 and 17 seasons, the amount would escalate because Wolfsburg is in the Bundesliga. That places the club in the highest training compensation category — Category I — which requires payments of EUR90,000 per season (approximately $104,000). Assuming Lonestar was credited for Gaines’ entire age 17 season, this would mean Wolfsburg could owe approximately $252,000 in training compensation for Gaines. Given that Wolfsburg has paid transfer fees that high for only two youth players in the last 20 years, the chances it would have signed Gaines and paid training compensation seem low.

Taking this a step further, the chances Wolfsburg would sign a similar player from, say, Colombia, where it would have to pay training compensation for him, also seem low. Consequently, American youth players are attractive to European clubs in a way other non-Europeans are not.

Clubs do not mind paying for high-value young players

When a young player is valuable enough, training compensation becomes less important. This makes sense. If an 18-year-old were so good that a club valued him at $10 million, passing on him to avoid $300,000 in training compensation would seem short-sighted.

Typically, transfer fee signings are established first team players or highly-coveted youth players. The largest share of non-Europeans who make these moves are from South America, but this is not exclusive. None have been American. The closest is 17-year-old Canadian Alphonso Davies, whose $11 million transfer from MLS’ Vancouver Whitecaps to Bayern Munich becomes official in January 2019. Bolstering the trend, Davies’ first team status is well-entrenched. He already has 63 MLS appearances and 6 goals.

In short, young players who attract transfer fees are not players a club would expect to get for free. So eliminating training compensation would not be as big of a concern.

Bottom Line

None of this suggests the American youths moving to Europe lack talent or potential. Rather, it suggests that some European clubs have found an inefficiency in the market. They can upgrade their talent pool without increasing their costs. And at a time when American youth players seem determined to escape the US system, a perfect match has been found. So unless circumstances change, expect European clubs to continue casting their American nets wide, hoping another Christian Pulisic or Weston McKennie is swimming below.

Random Observations Unleashed

  1. Circumstances may, in fact, change, as US youth clubs have been pushing for training compensation. If they are successful, it will be interesting to see the impact on American youths’ migration to Europe.
  2. One could argue that established young players also offer clubs value because they may have completed their training, which can reduce the amount of training compensation due. According to Annex 4, Section 1 of FIFA’s Regulations on the Status and Transfer of Players, even if a player has not reached 21-years-old, training compensation stops accumulating if “it is evident [he] has terminated his training period.” While, theoretically, early termination could factor into clubs’ decisions, the DRC has taken a “strict approach” to these claims. For example, in one recent case, the panel rejected a claim that a player with 770 professional minutes and regular appearances for his country’s U20 national team had completed his training period. So defeating training compensation on these grounds would be difficult.
  3. When negotiating a transfer fee for a young player, clubs could account for the training compensation by reducing what would otherwise have been the fee. This may happen. But it would be tough to find data on the issue. That is, we are unlikely to know how much (if at all) a selling club has reduced its transfer fee demand to cover the training compensation the buying club may owe.
  4. Genk has appealed the DRC’s Boonen decision to the Court of Arbitration for Sport. The CAS’s hearing on the matter was October 12, 2018. No decision has been rendered yet.
  5. Boonen spent roughly two-and-a-half years with Manchester United’s youth teams. At the beginning of the 2018–2019 season, he left for Belgian club KV Oostende on a free transfer. So far, he has appeared in seven out of eleven league games for Oostende’s first team — six times as a substitute. Oostende is 10th in the 16-team Belgian Jupiler League (top division).
  6. After a strong debut season with Wolfsburg’s U19’s (7 goals and 9 assists in 22 league games), Gaines was transferred to 2.Bundesliga club Darmstadt. There, he has struggled to find playing time — making only 2 league and one cup appearance last season, and none so far this season.