Media and Telecom Sector
Media and tech stocks saw notable shifts today, with Reddit jumping 11% on news of its upcoming S&P 500 inclusion and Nintendo rising 7% following strong Switch 2 game sales. Meanwhile, legacy and digital publishers are taking action over AI integration, with French newspapers filing a competition complaint against Google while Apple pursues licensing deals with news outlets. Additionally, Netflix is downsizing its internal gaming studios, and a record $12.5 billion deal was struck for the Los Angeles Lakers.
Netflix is closing internal game developers Night School Studio and Moonloot while cutting additional roles across its remaining games division. Night School, acquired by Netflix in 2021 as its very first studio purchase, shipped its cloud-streamed horror title Unhinged just six weeks before the shutdown. Despite co-CEO Greg Peters recently citing Unhinged and the FIFA title as top-tier cloud debuts with solid numbers, Netflix is abandoning internal development in favor of external partnerships. The closures follow a string of retreats that includes shuttering Team Blue in 2024, closing Boss Fight last October, and selling Spry Fox back to its founders in December. Helsinki-based Next Games remains Netflix's sole internal studio, while the broader games strategy narrows to four pillars: kids, party, narrative, and mainstream titles.
Reddit shares jumped nearly 11% in extended trading after S&P Dow Jones Indices announced the social media platform will join the benchmark S&P 500 index. The change takes effect before markets open on August 18, with Reddit replacing AvalonBay Communities following its acquisition by Equity Residential. Because mutual funds and exchange-traded funds tracking the S&P 500 must hold every constituent, the inclusion triggers a mechanical demand shock requiring index funds to buy shares regardless of current sentiment. J.P. Morgan analysts estimate index funds will need to purchase 16.7 million shares, nearly triple Reddit's average daily trading volume since its March 2024 IPO. The addition makes Reddit only the second pure-play social media company in the index alongside Meta. Despite posting its eighth consecutive quarter of revenue growth exceeding 60% with $805 million in second-quarter sales, the stock has traded down over 31% for the year amid investor concerns about volatile search-engine traffic driven by Google's AI Overviews.
France's largest newspaper alliance filed a formal complaint on August 11 with the Autorité de la concurrence, accusing Google of bypassing binding licensing obligations when it launched AI Overviews and AI Mode in the country on July 22. The Alliance de la Presse d'Information Générale (APIG), representing nearly 300 daily newspapers including Le Monde and Le Figaro, argues that deploying generative search summaries without opening dedicated remuneration talks violates the 2022 commitments Google accepted to settle previous neighboring-rights disputes. The rollout replaces traditional referral links with synthesized answers that Arcom, France's digital regulator, estimates reduce publisher traffic by 33% to 38% in active European markets. Google faces mounting regulatory pressure across the continent, having previously incurred a €500 million penalty in July 2021 and a €250 million fine in March 2024 for non-compliance with French competition orders. The competition watchdog has not yet indicated when it will rule on whether generative search features constitute a distinct service requiring separate licensing negotiations.