Dish Network Dishes Out $320 Million in Blockbuster Deal

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Can a brand left for dead be revived by a satellite TV provider?

That’s the question on the minds of analysts and investors alike as Dish Network made a winning bid yesterday valued at $320 million for the assets of video rental leader gone bankrupt, Blockbuster.

What’s Dish up to? Tom Cullen, EVP with Dish, said in a statement, “Blockbuster will complement our existing video offerings while presenting cross-marketing and service extension opportunities for Dish Network.”

But not everyone’s buying that.[more]

Michael Pachter, an analyst with Wedbush, wonders if Dish will unload the chain’s stores, telling the Associated Press:

“Dish has zero retail capability at present, and therefore lacks the scale or synergies to benefit from the operation of Blockbuster retail stores. …[Dish] decided that rather than buying the streaming capability and the Blockbuster brand name from another party, it could bid for the entire company and offer the store inventory to another bidder at a later date.” Brian Sozzi, an analyst with Wall Street Strategies, had a different perspective: “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 drug stores and physical locations.”

Dish isn’t dishing out much in the way of hints, since the deal has to meet with bankruptcy court approval first. But if it goes through, Dish will own a name that may, or may not, continue to have relevance in the rapidly changing movie rental business.

The Charlie Ergen-owned rival to DirecTV will also be stuck with somewhere under 2,000 physical Blockbuster locations to deal with. “Dish now has to decide how many Blockbuster locations to close as consumers migrate to online rentals, and how to keep relationships with movie studios that may not have been paid the full amount of their claims,” writes Tiffany Kary in Bloomberg Businessweek.

David Berliner, an adviser at BDO Consulting, told Kary that the deal may be all about gaining customers for Dish Network’s satellite service. He cited a similar situation — the $95 million acquisition of electronics chain The Wiz by Cablevision in 1998. Cablevision “got access to Wiz customers to sell Cablevision services,” said Berliner.

Customers, in fact, may be the heart of the matter. Despite Blockbuster’s fall, the chain’s customers could be the pot of gold at the end of Dish Network’s rainbow. Locked in a battle with DirecTV and US cable operators including Comcast, Dish has been on an acquisition spree. The company is buying bankrupt satellite firm DBSD North America while EchoStar, which spun off from Dish in 2008, is buying satellite Internet company Hughes Communications.

Increasingly, Dish Network competes with digital streaming companies as well, including Netflix, which just announced it is licensing the show Mad Men at a hefty $1 million per episode.

It’s a sign that the web streaming business is getting more aggressive in obtaining content in an effort to gain exclusivity and, ultimately, consumer loyalty. So the Dish-Blockbuster deal is just one more hairpin curve on the road to a digital future.

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