How Lionel Messi’s Miami Deal Stymied Saudi Arabia

How David Beckham beat the Saudis

Just a day after Saudi Arabia claimed a huge win in sports — an agreement to merge the PGA Tour with its own upstart golf circuit, LIV — the kingdom suffered a stinging defeat: It fell short in its quest to land Lionel Messi, one of soccer’s all-time greats.

Instead, Mr. Messi appears to be headed to Inter Miami, the M.L.S. team co-founded by David Beckham. It’s a sign that near-limitless oil money can’t buy everything — but the complicated arrangements to bring Messi to Florida also hint at what it takes to trump Saudi riches.

What Mr. Messi stands to get: Contract details haven’t been released, but what’s known about Inter Miami’s offer to the Argentine star includes a roster spot free from the limits of M.L.S. salary rules and, highly unusually, an ownership stake in Inter Miami once his playing career ends.

But the commercial partnerships that Inter Miami crafted may have given the team a leg up on the Saudis, in the form of revenue-sharing agreements with Adidas and Apple, major M.L.S. commercial partners.

While it’s not unheard-of for sportswear companies to help pay for transfers of major soccer players, the iPhone maker’s contribution is more unusual. Mr. Messi coming to the M.L.S. could turbocharge subscriptions to the Apple TV+ streaming service, which recently paid $2.5 billion for the rights to stream the league’s matches for 10 years. (Apple also announced on Wednesday that it would produce a multipart documentary series about the soccer star.)

Inter Miami had to get extremely creative to trump Saudi Arabia, which reportedly offered Mr. Messi as much as $500 million to play in its homegrown soccer league and sees sports as part of its campaign to become a bigger geopolitical force.

The kingdom has already lured other top players in hopes of quickly making it a world-class competition. The Portuguese star Cristiano Ronaldo, for instance, is playing on Saudi pitches for $100 million a year, while Karim Benzema of France just signed on as well. And it handed ownership of four of the country’s top clubs to its powerful sovereign wealth fund to boost their financial firepower as the kingdom looks to bid to host the men’s World Cup in 2030.

Mr. Messi also already had ties to Saudi Arabia, in the form of a multimillion-dollar spokesman role for the country’s tourism board.

Beating Middle Eastern money isn’t impossible, but it is hard. A driver of the proposed merger of the PGA Tour and LIV was the prospect of an extended legal battle between the golf circuits — one that Saudi Arabia has more than enough money to keep waging.

Saudi Arabia and other Gulf States, including Abu Dhabi and Qatar, have bought and transformed big European soccer franchises by simply being willing to spend more money than anyone else possibly could.

That said, the PGA-LIV deal is far from done. While analysts and high-profile golf fans like the financier Henry Kravis praised the proposed transaction, Senate Democrats called for an investigation. And the Justice Department was still investigating the PGA Tour for potential antitrust violations. And other golf aficionados — as well as some players, including Rory McIlroy, who begrudgingly accepted the deal — remain deeply skeptical, if not downright opposed, to LIV.

HERE’S WHAT’S HAPPENING

Hard-line Republicans paralyze the House. Members of the House Freedom Caucus maintained control of the chamber’s floor, forcing Speaker Kevin McCarthy to scrap votes for the rest of the week. The intraparty feud raised concerns about whether Mr. McCarthy, who enraged conservatives by agreeing to the debt ceiling compromise, can continue to govern.

The Eurozone falls into recession. The bloc’s economy contracted 0.4 percent in the three months to March, the second consecutive quarterly decline, according to the E.U. statistics agency, as surging inflation following the war in Ukraine hit household spending.

Senators accuse TikTok of misleading Congress. Richard Blumenthal, Democrat of Connecticut, and Marsha Blackburn, Republican of Tennessee, questioned statements made under oath by top executives about how the Chinese-owned app handles and stores American user data. Separately, a former executive of ByteDance, TikTok’s parent, accused ByteDance of helping the Beijing authorities spy on Hong Kong protesters.

CNN’s future is under scrutiny after its chief is fired. Chris Licht was dismissed as the news outlet’s C.E.O., after a rocky 13-month tenure during which he lost support from top talent and, ultimately, his patron, the Warner Bros. Discovery chief David Zaslav. Shares in Warner Bros. Discovery rose 8 percent on Wednesday, but it’s unclear whom Mr. Zaslav will hire to reverse the network’s falling fortunes.

GameStop ousts its C.E.O. and elevates its top shareholder. The video game retailer fired Matt Furlong, while giving Ryan Cohen, the activist investor who became its chairman, a promotion to executive chairman. Shares in GameStop fell 19 percent on Wednesday; the company has been struggling to return to profitability amid a consumer shift to downloading game titles.

More haze will haunt the East Coast

Don’t put away your masks just yet: Health alerts were extended on Thursday for wide swaths of the United States, from the Northeast to the Midwest and the South, as noxious wildfire smoke continues to drift down from Canada.

The F.A.A., which had slowed air traffic to and from New York on Wednesday, issued an alert on Thursday morning that inbound flights to La Guardia Airport would be grounded because of low visibility. That order could be extended to Newark and J.F.K. International airports as well, the agency said.

Businesses and schools in scores of American cities have suffered from the haze of tiny particles, akin to car or coal plant fumes, illustrating how unprepared much of the country is for climate crises.

New York City had some of the worst air quality of any city in the world on Wednesday, according to reports, delaying flights and canceling outdoor and indoor events including Broadway shows, “Hamlet” in Central Park and a New York Yankees game. Al fresco dining was a no-go, too.

Many businesses, including Google (which recently urged its workers to return to the office), suggested that employees work from home if possible.

The city may see some improvement on Thursday. But the air quality in Philadelphia is hitting dangerous levels and haze is being seen as far south as Alabama. Meanwhile, the White House said the United States planned to send 600 firefighters and other specialists to Canada to help combat the blazes, which total nearly 250 fires.

Wildfire disruptions are becoming increasingly costly. The toll of smoke on the U.S. economy is now about $125 billion a year, according to the National Bureau of Economic Research.

Expect more of these kinds of emergencies. While no research has yet linked this week’s events to climate change, the climbing global temperatures — driven in large part by human activity — are making parts of the earth more prone to wildfires and other catastrophes.

And the expected arrival of the weather event known as El Niño later this year could exacerbate matters, creating even more wildfires.

“I think they’re actually doing everybody a huge disservice with the level of hype they are creating.”

— Ken Griffin, on cheerleaders of new artificial intelligence services. Speaking to new interns of Citadel, his financial giant, he warned that while new advances would yield many benefits, they’re years away from becoming reality.

A reality check for the markets

It’s now an open question whether the Fed next week will leave interest rates unchanged, a decision that investors have called a “Fed pause,” or raise them.

Market futures on Thursday morning were pricing in a 35 percent chance of a rate increase at the June 13-14 meeting. That’s far from a certainty, but the odds have grown more likely in recent days — and a rate cut later this year looks to be off the table.

Investors believe that taming inflation will take longer than expected. The central banks of Canada and Australia surprised economists this week by raising interest rates, signaling that more aggressive monetary policy will be needed to slow consumer spending and bring down prices.

The upshot: Yields on sovereign debt across the globe have spiked, raising borrowing prices for consumers and businesses.

A Treasury borrowing boom is also weighing on the markets. Now that the debt ceiling deal is law, the federal government will replenish its coffers by auctioning off roughly $1 trillion in Treasury bills this summer.

That coming tsunami of debt could push borrowing costs higher still and trigger a kind of liquidity crunch for lenders, Wall Street analysts warn.

That’s making investors wary of rate-sensitive sectors. Tech stocks slumped on Wednesday and were under pressure again in premarket trading this morning. The tech-heavy Nasdaq has been one of the biggest gainers this year as investors bet that the Fed is reaching the end of its rate-raising cycle, putting a ceiling on borrowing costs.

Still, tech stocks have been lifted by investor enthusiasm for artificial intelligence, and that rally may not yet have run its course. Analysts at Goldman Sachs calculate that widespread A.I. adoption during the next decade could lift G.D.P., boost corporate profits and drive a potentially substantial surge in the S&P 500 over that period.

The market’s uplift from A.I. is coming from just a few companies — but that has been enough to push the entire benchmark index to its highest level since August.

THE SPEED READ

Deals

• Toshiba’s board recommended that shareholders of the Japanese electronics giant accept a $14 billion takeover bid by an investor consortium. (Reuters)

• Kim Kardashian became the biggest draw at the Super Return conference in Berlin wearing her new hat as private equity mogul. (Bloomberg)

• Britain’s Daily Telegraph and Sunday Telegraph will be put up for sale amid a dispute between the newspapers’ current owners and their lender. (Guardian)

Artificial intelligence

Best of the rest

• China and Cuba have reportedly reached a secret deal that would enable China to set up an electronic eavesdropping facility on the island. (WSJ)

• Lawyers for Binance said that Gary Gensler offered to advise the crypto exchange in 2019, years before becoming the S.E.C. chairman and leading a lawsuit against the company. (CNBC)

• Lawyers for Fox News accused Tucker Carlson of a breach of contract, after he began broadcasting his new show on Twitter. (Axios)

• Thirteen women have accused Crispin Odey, the British hedge fund mogul, of sexual assault and harassment. (FT)

We’d like your feedback! Please email thoughts and suggestions to [email protected].