Warren Buffett on Paramount’s Tough Quarter: “Not Good News” When a Company Slashes Its Dividend

Alex Weprin
·2 min read
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Paramount’s difficult quarter appears to have given one of the company’s largest outside shareholders some pause.

On Saturday, Warren Buffett’s Berkshire Hathaway held its annual meeting in Omaha, Nebraska. And, as is tradition, Buffett and his Berkshire vice chairman Charlie Munger answered dozens of questions from shareholders, over multiple hours.

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While many of the questions tackled the global economy, inflation, Apple, artificial intelligence and Berkshire’s lucrative insurance businesses, one question homed in on a particular Berkshire holding: Paramount Global. Buffett and Berkshire own about 94 million Paramount shares, currently valued at about $1.6 billion, per Berkshire’s latest filings.

A Berkshire shareholder asked whether Buffett still had “conviction in his investment thesis” in Paramount, and how he sees the streaming wars evolving.

Paramount slashed its dividend last week as it sought to conserve free cash flow and shift its streaming business toward profitability.

“It’s not good news when any company cuts its dividend dramatically,” Buffett told the shareholder.

But his comments on the streaming wars suggest that the legendary investor sees a long, drawn-out, bloody battle for, as he calls it, “eyeballs.”

“The streaming business is extremely interesting to watch, because people love to use their eyeballs being entertained on a screen in front of them or a phone, whatever it may be, but there is a lot of companies doing it, and you need fewer companies or you need higher prices, or it doesn’t work,” Buffett said.

Buffett went on to recall a time when he owned a gas station in Omaha and found that his profits were being determined by a larger station down the street. “He determined our profit, because we looked at his price every day,” Buffett said, adding that his station eventually went under because they couldn’t compete in price and make a profit.

In the streaming wars, “you’ve got a bunch of companies that don’t want to quit. Who knows what pricing does under that?” Buffett said.

Berkshire first bought into Paramount about a year ago and has increased its stake since then. The stake has lost more than a billion dollars in value since Berkshire bought it, but so far Buffett’s firm hasn’t sold.

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