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Paramount Gets NYT Treatment, Shari Redstone & Bob Bakish, Honeycomb?!?, and RIP Tom Murphy
"In many respects, we continue to be the underdog -- and that's OK"
Stocks don’t care who you are, where you’re from, or what you look like. The money game is open to anyone who wants to play. Just open a brokerage account and start investing.
And, while stories of corporate greed dominate media headlines, the existence of publicly-traded companies is actually a social good.
A big one.
They allow anyone (even a schlub like me) to hop onboard at any time and tag along for the profit-filled ride.
Let’s look at Apple. If you watched Steve Jobs (no reality distortion field necessary) reveal the original iPhone back in 2007 and felt certain that this tiny device would be The Next Big Thing, you could have bought shares of AAPL right then and there.
Every $1 invested in Apple post-iPhone reveal would now be $48.50.
You or I didn’t need to dream up the concept for the iPhone to earn these life-changing returns. We just had to recognize a great idea when we saw it. (And, then, actually invest in it. That’s important, too.)
Where else can you profit off someone else’s business acumen and vision?
Stocks truly are the most egalitarian of moneymakers.
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Paramount Global and The Gray Lady 🗞
Big spread on Paramount in this Sunday’s edition of the New York Times.
The Times reporter spoke with both chairwoman Shari Redstone and CEO Bob Bakish — examining whether Paramount can really afford to go it alone in the rapidly-consolidating streaming space. The article also provided some intriguing behind-the-scenes details on Paramount’s streaming strategy, even as the market remains somewhat unconvinced.
“In many respects, we continue to be the underdog — and that’s OK,” said Bakish. “But I think, as time goes on, people will continue to increasingly see that Paramount is powerful.”
In recent weeks, Wall Street has put a sharper focus on the profitability of streaming businesses. Netflix said in April that it lost streaming subscribers in the first quarter of the year, reversing a decade of growth and causing its stock to tumble. Mr. Bakish said that competitors like Netflix — which he cheekily calls “legacy streamers” — are only now coming around to the importance of the revenue strategies Paramount has embraced for years, including advertising.
Not everyone is fully onboard yet. The Times spoke to Rich Greenfield of LightShed Partners, who remains skeptical of Paramount’s ability to stay above the fray of the streaming wars. He believes that Paramount will either have to grow its service through acquisitions — or get gobbled up itself by a rival streamer.
The best part is that, for the long-term PARA investor, either option should be a profitable one. Especially if you’re among those lucky (or smart) enough to snag shares at the recent $26-27 lows. Big returns either way.
If I had to hazard a guess, it’s this very margin of safety that attracted Berkshire Hathaway in Q1 2022.
Paramount got a recent vote of confidence this month from Berkshire Hathaway, the holding company run by the billionaire Warren Buffett. Berkshire Hathaway said in a filing that it had amassed a $2.6 billion stake in Paramount. Berkshire Hathaway did not explain its rationale for investing in Paramount, and the company declined to grant an interview to The Times. But the news caused Paramount’s shares to spike 15 percent.
Ms. Redstone said Berkshire Hathaway’s investment in Paramount took her by surprise. She got the news hours after it had become public.
“I was out to dinner and the person said to me, ‘What do you think of Buffett’s investment?’” Ms. Redstone said. “And I was like, ‘What?’”
Ultimately, the Buffett imprimatur generates more media noise than any long-term difference in the company’s prospects. Still, it’s nice to have.
Paramount will sink or swim based on how well the company executes its multi-faceted media strategy. Pure-play streamers once seemed the only way forward, but Redstone and co. see a new path emerging.
Ms. Redstone said she believed that her father (Sumner Redstone) would generally agree with her approach toward Paramount. And she said she thinks that Wall Street will ultimately come around, provided the company delivers on its promises.
“I think the market keeps saying, ‘Show me, show me,’” Ms. Redstone said. “And I really believe we keep showing them.”
The Name Game
One final, behind-the-scenes nugget from the NYT Paramount story: While planning the company’s streaming future, ViacomCBS (as it was known then) execs considered several different names for the flagship streaming service.
Some of the runners-up to the final Paramount+ name include The Eye (inspired by CBS’s iconic logo), Pluto+ (a twist on Pluto TV), and Honeycomb. No idea how that last one ties in at all.
I think they made the right choice.
RIP Tom Murphy
The great Tom Murphy passed away last week at the age of 96, just months after resigning his place on the Berkshire Hathaway board of directors.
Murphy will be remembered as the rare media magnate who preferred to work from the shadows, eschewing splashy magazine covers and other Hollywood trappings. He will always be remembered for Capital Cities’ shocking $3.5 billion purchase of ABC in 1985 — an acquisition that the Wall Street Journal described as “Minnow Swallows Whale”.
Murphy then one-upped that move with 1995’s “merger of equals” between CapCities/ABC and The Walt Disney Company. In less than forty years, Murphy’s unassuming and laser-focused leadership had turned Capital Cities from a humble collection of regional television stations into one of the most powerful media conglomerates in the world.
In fact, from the time Cap Cities went public in 1957 until it merged with Disney in ‘95, the company’s shares increased in value more than 2,000 times over.
Murphy nimbly allocated capital according to what would ultimately prove best for his shareholders. When Cap Cities’ stock appeared undervalued, he repurchased it by the handful. Likewise, when other media companies looked like a steal, Murphy shifted into acquisition mode. This willingness to shift strategies in response to market conditions played a big role in Cap Cities’ outperformance.
“Tom Murphy has taught me more about running a business than any other person,” Warren Buffett said earlier this year. “We have been friends and mental partners for more than fifty years. My only regret is that I didn’t meet him earlier.”
And, much like Buffett, Murphy preferred to hire excellent managers — and then leave them alone to work their magic. This decentralized power structure was unlike other C-suite and VP-addicted media companies, but it created a culture of trust and accountability that the others lacked.
My favorite Cap Cities story: Following one of the company’s management retreats, a bartender who worked the event went out and purchased some Capital Cities stock. When asked why he had done this, the bartender served up a very interesting reply. “I’ve worked at a lot of corporate events over the years,” he said, “but Capital Cities was the only company where you couldn’t tell who the bosses were.”
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Disclosure: This is not financial advice. I am not a financial advisor. Do your own research before making any investment decisions.