Quantcast

Dish Network Wins Blockbuster Auction

April 6, 2011

Dish Network Corp. won Blockbuster Inc. in a bankruptcy auction for $320 million on Wednesday, setting up the satellite TV business to compete with Netflix.

Dish won against other big bidders like activist investor Carl Icahn.

Dish said the deal, which includes over 1,700 Blockbuster stores, gives it new ways to market its services.

The deal covers “substantially all” of the rental chain’s business, and will give the satellite company the rights Blockbuster had to stream movies over the Internet.

“This is very clever,” Todd Mitchell, an analyst with Kaufman Brothers, rold Reuters. “Dish can transition Blockbuster from a retail to a streaming model so you have basically a Netflix-like offering.”

According to analysts, the deal follows two other moves led by Dish Chairman and CEO Charlie Ergen this year that could transform the company into a major provider of on-demand video through its satellite system.

Dish bought satellites and land-based communications company DBSD North American last month for about $1.4 billion.

Dish expects to pay about $228 million in cash to acquire Blockbuster’s assets, which as of February 27 included over $100 million of receivables and cash and a rental library estimated to be worth $175 million.

The money will go toward paying off the company’s creditors, which include Icahn and other bondholders and movie studios.  Blockbuster is in debt over $1 billion to creditors.

David Berliner, a turnaround advisor for BDO Consulting, said that the deal reminded him of Cablevision’s purchase of The Wiz electronics stores as a way to sell it cable TV subscriptions.

He said that new management with a background in satellite technology could help breath new life into the Blockbuster business.

“Maybe they can do an even better job with Blockbuster online in terms of deals with streaming video,” Berliner told Reuters.

Blockbuster said when it filed for bankruptcy that it had 1.3 million subscribers for monthly or annual subscription services.  Netflix Inc. has over 20 million for its mail-order delivery of movies.

“They have to continue to move gradually out of bricks and mortar stores and get more into online and take advantage of that opportunity,” Berliner told Reuters.

Blockbuster once boasted over 7,200 stores in the U.S. and 17 other countries, but fell victim to competition from Netflix, rental outlets like Redbox, and online on-demand movie and TV services.

“With its more than 1,700 store locations, a highly recognizable brand and multiple methods of delivery, Blockbuster will complement our existing video offerings while presenting cross-marketing and service extension opportunities for Dish Network,” said Dish’s executive vice president Tom Cullen.

“While Blockbuster’s business faces significant challenges, we look forward to working with its employees to re-establish Blockbuster’s brand as a leader in video entertainment,” he said in a statement.

On the Net:




comments powered by Disqus