Dish Network To Reboot Blockbuster

Just as it appeared that Blockbuster would be liquidated Dish Network bought it for $320.6 million in a process overseen by a federal bankruptcy court, according to The Wall Street Journal.

The most extraordinary part of the buyout is not that Dish topped the offer of perennial Blockbuster investor Carl Icahn, but that the satellite TV company will continue to operate the video rental business as a largely intact company. It is hard understand how Dish could have made this decision.

Dish apparently thinks it can sell subscriptions to its satellite TV business from the counters at Blockbuster stores. Dish also sees “synergy” between the Blockbuster VOD over IP service and its own.

The Dish decision puts it more into direct competition with premium video over the internet companies like Netflix (NASDAQ: NFLX), Apple (NASDAQ: AAPL), and Amazon.com (NASDAQ: AMZN). If so, Dish is late to a crowded party and may be ill-equipped to do well.

One of the advantages Netflix, the streaming video leader, has is its 20 million subscribers, over two-thirds of which use its online service. Netflix has also shown an appetite for the creation of original programs like those made by HBO. Netflix has also made expensive arrangements with producers to get exclusive rights to popular content. It will start to offer the series “Mad Men” soon.

Dish apparently failed to understand how difficult the Blockbuster model was to make work. Icahn’s replaced management and board could not. Even this access to talent could not repair a business which became antiquated in the blink of an eye. Dish does not have any better management to offer and its does not have a new model which has not been tried before. Blockbuster died a long time ago, and Dish will not succeed where so many others have failed.

Douglas A. McIntyre