Is Paramount Warren Buffett’s Greatest Investment Mistake?

Contributed By: The Big Fat Whale 

• Buffett's Position is Down Close to 60%
• Streaming Business is still in transition
• Huge One-Off Losses from Programming Charges of 2.4 billion dollars
• An Interesting Turnaround Play

 

Paramount has been on a downward spiral since the start of 2021. Even Warren Buffett's endorsement and investment does not aid in slowing the decline. Berkshire Hathaway, as of this write-up, has a 15.4% stake in Paramount which makes it the biggest shareholder.

Based on Barron's estimate, Berkshire got their Paramount stake (93 million shares) at an average price of close to $30. Based on the current price of $12.5, Buffett is down by close to 60%.

The boiling question will be:

Is Paramount going to be Warren Buffett's Greatest Investment Mistake?

 

Video Streaming Industry Growth

Source: Statista

We have no doubt the streaming business is an extremely competitive industry. Only Netflix is able to churn out profits at this juncture.

Also, to keep consumers engaged, new content has to be regularly created in order to prevent subscribers from leaving their streaming network. So all these will require massive investments, not unlike the airline business. Amazon has budgeted 15 billion dollars on content creation for 2023.

Statista estimates that the revenue in the Video Streaming (SVoD) market is projected to reach US$95.88bn in 2023. Revenue is expected to show an annual growth rate (CAGR 2023-2027) of 9.47%, resulting in a projected market volume of US$137.70bn by 2027.

Grand View Research is more optimistic and is projecting an annual growth rate of 21.5% till 2030.

Source: FlixPatrol

Looking at the subscriber numbers, there is lots of room to grow for Paramount as they are currently in 7th position. With the combination of Paramount+ and Showtime, it would make it a more enticing package for consumers to onboard to Paramount's streaming offer.

However, we are of the view that consolidation is likely as there are just too many players. With the price war to gain market share, it will hurt the bottom line and only the fittest will survive. This explains why only Netflix is able to net a profit, likely due to their economies of scale.

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