Dish’s Blockbuster purchase may mean brand’s survival

Posted April 06, 2011, at 9:32 p.m.

NEW YORK — Dish Network Corp.’s agreement to buy Blockbuster Inc.’s assets out of bankruptcy could keep the movie-rental chain and its blue-and-gold logo from disappearing.

But whether the No. 3 pay TV company can use Blockbuster’s brand, stores and streaming-video capabilities to create services more relevant to the age of Netflix and Hulu remains to be seen.

Dish, headed by billionaire Charles Ergen, won a two-day bankruptcy auction for Blockbuster that stretched into the early hours of Wednesday morning with a bid valued at $228 million in cash.

Dish has so far been mum about specific plans for Blockbuster, but in its announcement, the company highlighted the 1,700 stores that will remain and “multiple methods of delivery.”

Dish spokeswoman Francie Bauer said the Englewood, Colo.-based company would not comment further since the deal must receive bankruptcy court approval.

A hearing for that approval is set for Thursday. Dish expects the deal to close in the second quarter.

Satellite TV providers have been losing new subscribers as cheaper alternatives like Hulu and Netflix become more popular.

Ergen has in past calls with analysts praised Netflix, which offers unlimited streaming video at a monthly price along with a DVD-by-mail service.

Acquiring Blockbuster will make Dish a more viable competitor in streaming video online. It’s doing so at a price easily affordable for Dish, which had nearly $3 billion in cash as of Dec. 31.

Some thought Dish would keep at least some stores open.

“In order to get the most from the investment, Dish Network needs to keep the Blockbuster brand top of mind with consumers, and that means in kiosks in drugstores and physical store locations,” Wall Street Strategies analyst Brian Sozzi said.

But others thought a total liquidation might be a possibility.

“Dish has zero retail capability at present, and therefore lacks the scale or synergies to benefit from the operation of Blockbuster retail stores,” Wedbush analyst Michael Pachter said.

Either way, Dish and Ergen, who also chairs former Dish parent EchoStar, is gambling the deal can help reinvent Dish as consumers’ TV and movie-watching habits evolve.

The company, with 14.1 million subscribers, is facing a maturing pay-TV industry as more TV and movie watchers go online or subscribe to services like Hulu and Netflix.

In 2010 new Dish subscribers fell 2 percent, hurt by aggressive discounts by competitors as satellite TV players duke it out for subscribers.

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