Billionaire investor Warren Buffet has criticized entertainment giant Paramount Global and its executives for a recent decision to cut a dividend paid to the company’s shareholders.
During a conference call with shareholders last week, Paramount executives said it was adjusting its quarterly dividend — or the distribution of corporate earnings back to shareholders — from 24 cents per share to 5 cents per share. The move was justified as needed to increase cash flow and realign investments as Paramount continues to reorganize its business around the Paramount Plus, Pluto TV and Showtime streaming services.
Over the weekend, Buffett held his annual meeting of investors at his Omaha home, which included shareholders of his Berkshire Hathaway holding conglomerate. When asked by an investor for his thoughts on Paramount, Buffett remarked that it was “not good news when any company cuts its dividend dramatically,” but suggested it might be needed to help Paramount better compete against other media companies who have launched similar streaming products.
“The streaming business is extremely interesting to watch — people love to use their eyeballs being entertained on a screen in front of them or a phone, whatever it may be,” Buffett said. “But there are a lot of companies doing it. You need fewer companies, or you need higher prices, or it doesn’t work.”
To the latter point, Paramount executives have confirmed their intention to raise subscription prices on Paramount Plus later this year as part of a broader plan to combine that product with multiplex movie network, Showtime. Currently, a combined Paramount Plus with Showtime costs around $12 a month or $120 a year, while a cheaper version of Paramount Plus supported by ads and without Showtime content costs $5 a month.
Executives at Paramount say the value proposition of Paramount Plus has been off for a while, with the company investing heavily in original and licensed programming as well as live news and sports. Some, like Paramount’s CEO Bob Bakish, feel the time is right to adjust the price of Paramount Plus in a way that won’t impact the company’s churn rate while still being viewed by consumers as an attractive streaming option compared to Netflix, Disney Plus or HBO Max.
“We are effectuating a price increase as we move forward in the summer — we feel really great about that,” Bakish said on a recent conference call with investors. “The levers are in place to continue to drive Paramount Plus subscriber revenue and ultimately continue down the path to profitability.”
Buffett is among those hoping Paramount is on the right track: His Berkshire Hathaway owns around 94 million shares of the media company valued at around $1.6 billion, according to its latest financial disclosures. Buffett began acquiring Paramount stock last year; to date, he has seen the value of his investment drop by more than $1 billion as Paramount struggles to curb expenses while investing in and marketing its streaming products.
Last week, Paramount executives affirmed the worst of that storm may be over, with both Bakish and Paramount Chief Financial Officer Naveen Chopra saying the media company’s financial investment in Paramount Plus and related services will peak this year. The company looks to be profitable in 2024.