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Thanks for reading The Briefing, our nightly column where we break down the day’s news. If you like what you see, I encourage you to subscribe to our reporting here.
Greetings! Netflix shareholders may be a happy bunch right now, after the bonanza year the video-streaming stock has enjoyed. Though its revenue is growing at a decent but unspectacular clip—15% in the third quarter—its shares have so far risen 87% this year to above $900 a share. Since their low point in mid-2022, during a freakout about Netflix’s subscriber stall, the stock has soared more than 440%. Given how badly every other streamer is doing, investors seem to regard Netflix as the only streaming stock worth buying. Shareholders shouldn’t get too comfortable. Today’s news that Netflix has won the rights to exclusively stream the FIFA Women’s World Cup in 2027 and 2031 is a bearish sign for the stock. It’s further evidence—on top of next week’s NFL games streaming on Netflix—that the company has abandoned the admirable discipline that kept it out of live sports and is charging into that morass. That should worry anyone who owns shares in the company. Buying the TV rights to live sports is a ticket to lose a boatload of money. Traditional TV networks feel they have little choice because it’s the only way left for them to draw lots of viewers and the ad dollars that follow. It doesn’t seem to matter to them that, given how much sports rights have risen in cost, the networks (aside from Disney’s ESPN) may not make money from sports programs. Sure, the TV executives may not be wrong. Witness the impact of Warner Bros. Discovery’s loss of the NBA rights to companies willing to pay more: The future of its cable channels is in doubt. But Netflix isn’t in that unenviable situation. It has a global lead in subscribers, giving it the resources to spend enough on programming to maintain its lead. It’s making a bundle of money—$5.5 billion in free cash flow in the first nine months of 2024, nearly three times as much as Warner Bros. Discovery, which has slightly more revenue. True, Netflix isn’t growing fast anymore. To remedy that, it’s introduced an advertising tier, which in turn is why it is turning to sports. The flaw with this strategy is that all sports will do is pit Netflix against every other TV network and streaming service for both ad dollars and streaming rights. The only winners are the sports leagues, who rake in the money. Bulls will argue that Netflix’s sports deals so far haven’t been exorbitant. That’s true—but its sports investment won’t end there. If it wants to really use sports to draw a significant amount of advertising dollars, it will have to spend a lot more money buying more rights. It’s a no-win situation that Netflix would be better off avoiding. There’s a TV series in the drama surrounding the smuggling of advanced artificial intelligence chips into Chinese hands, evading U.S. export controls. Our latest update—which could be an episode in such a series—reveals how smugglers are getting around the spot checks Nvidia’s distributors, such as Supermicro, are doing. It’s definitely worth a read. In other Nvidia news, we published this deep dive into the chip company’s strategy to build up its software and cloud business, putting it into competition with its biggest customers. And we looked at how the Chinese antitrust regulator’s inquiry into Nvidia’s long-completed Mellanox acquisition is likely to be the first of such reviews by China in response to tightening U.S. export controls that hurt Chinese companies. On the AI front, Amir Efrati dug into Google’s plans to add an AI Mode to its search engine as part of its efforts to better compete with OpenAI’s ChatGPT. Stephanie Palazzolo highlighted Anthropic’s Democrat ties, which could complicate the AI startup’s life in the new Trump administration. Our biggest AI story was our profile of how Salesforce CEO Marc Benioff is trying to reinvent Salesforce for the AI era. Crypto insiders met this week in Washington in what our crypto reporter Yueqi Yang called a celebration of Trump’s victory. Yueqi reported on what industry folks are planning for the new, crypto-friendly administration. In the augmented reality world, Sylvia Varnham O’Regan scooped news that Google had hired more than 100 employees from once-hot AR firm Magic Leap as contractors, to help with Google’s work on Android XR. In the first edition of The Arena, a Weekend column covering the business and future of sports, Sara Germano dug into the wave of female basketball players designing shoes—and the booming sales of the resulting products. In e-commerce, Ann Gehan revealed how Shopify’s efforts to promote its Shop Pay branded checkout is having repercussions for startups that sell on its e-commerce platform. In venture news, we revealed which venture capitalists would do well from the IPOs expected in 2025. Among our newsletters worth checking out this week, Kaya Yurieff’s analysis of how the TikTok case will play out in the Supreme Court is well worth a read. Cory Weinberg’s Dealmaker column scooped the news that Accel’s latest growth fund is quite a bit smaller than its last one, from 2021. And Steve Levine spotlighted the challenges facing Tesla. • The Consumer Financial Protection Bureau sued payments network Zelle and three of the banks that operate and own it—JPMorgan Chase, Bank of America and Wells Fargo—for allegedly failing to prevent widespread fraud on the platform. • Shivakumar Venkataraman, OpenAI’s search chief, has departed just seven months after he joined the company to lead the development of search and artificial intelligence for enterprise customers. • OpenAI on Friday announced the next generation of its o1 reasoning model, which takes more time to “think” about questions users give it before responding. The model is called “o3.” • The UK data regulator criticized Google for a change to its ads policy that the regulator says will make it easier for brands using Google’s advertising technology to track users without their consent. • Bullish, the crypto exchange that owns CoinDesk, abruptly dismissed three top editors, including editor-in-chief Kevin Reynolds, after forcing the publication to remove an article about crypto billionaire Justin Sun, Fortune reported. Reynolds’ deputies, Nick Baker and Marc Hochstein were also fired. AI Agenda by Stephanie Palazzolo separates hype from reality and explains how AI is transforming industries. The 4x/week newsletter details the innovation and disruption happening in AI, from the AI startup funding frenzy to the major technological breakthroughs that will set the agenda for decades to come. Sign up today. How do our readers envision the progress of artificial intelligence in 2025 and beyond? How much do we already know about AI’s potential and what remains unknown? The Information surveyed our readers in collaboration with Comcast NBCUniversal LIFT Labs to understand their perspective on what's in store for next year. Read up on the insights they provided here.
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