Bankrupt Blockbuster Dished Up

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News Posted: Wed, Apr 6 2011 4:42 PM
After some six weeks on the auction block, beleagured Blockbuster has found a buyer. The Dish Network has agreed to purchase its erstwhile competitor. The company won the auction with a bid of some $320 million and expects to pay ~$228 million once other transaction adjustments are completed. The purchase process will reportedly be finished by the end of the current quarter.

"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 Tom Cullen, executive vice president of Sales, Marketing and Programming for DISH Network. "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."

In other comments, the company has indicated it wants to use current Blockbuster stores to distribute/showcase Dish service. Craig Moffett of Bernstein Research called Dish's move "strategically puzzling." He remarks "We find it difficult to imagine Blockbuster's rapidly shrinking store base becoming a source of significant incremental gross additions for the core Dish Network pay TV service." We agree.

Dish's services seem a poor match for Blockbuster's business focus. Further, there's no easy way for Dish to turn Blockbuster back into a profit center, the company's optimistic comments notwithstanding. Blockbuster is one of a relative handful of companies rendered almost completely anachronistic by the advent of digital distribution at the one hand, and kiosk rentals at the other. Cullen's reference to 1,700 store locations is disengenuous—when Blockbuster filed for Chapter 11 last September, it had 3,300 stores—nearly twice the current number.

Some of the 1700 remaining stores are undoubtedly profitable. Urban stores in areas with high foot traffic, for example, might remain firmly in the black for the forseeable future. Such stores could offer a convenience that rivals video-on-demand but run into problems from nearby rental kiosks that offer identical titles with minimal overhead. They may also face increased operating costs as store closures reduce Blockbusters' movie orders and therefore its access to bulk purchasing discounts.



In the face of these problems, we suspect the majority of Blockbuster stores might as well be boat anchors as far as Dish is concerned. Blockbuster's chief value lies in its brand, not its storefronts. Once the acquisition is complete, we expect the satellite TV provider will liquidate most of Blockbuster's physical assets, save for those that remain pertinent to Blockbuster's new position.

Dish is unlikely to spend much time/effort to rejuvenate the market presence of America's last major movie rental chain. Once it disposes of Blockbuster's brick-and-mortar detritus, Dish will be free to launch a kiosk program, continue Blockbusters' own Netflix-like service, or (and this seems most likely), apply the Blockbuster moniker to its own movie channel offerings.
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HHGrrl replied on Wed, Apr 6 2011 10:01 PM

I wouldn't be surprised to see more Blockbuster stores closing because of this. Two stores recently closed near where I live.

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AKwyn replied on Wed, Apr 6 2011 11:19 PM

Same here, although it's sad to see them go, I'm interested to see what Dish Network plans to do with Blockbuster.

Blockbuster has an online rental service, some kiosks and the brand; all of which prove especially useful to Dish Network. And it wouldn't surprised me if Dish built in a Blockbuster like app into their satellite box (so we can rent movies from the comforts of our Dish boxes.)

Still, it's anybodies guesses at this point.

 

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this sucks :/ i remember blockbuster... it was pretty sweet! :) sad that a few of them might be gne when i come home :/

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I remember the exuberant fees being charged by Blockbuster for late returns and damages. I hated Blockbuster for that.

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omegadoom13:
I remember the exuberant fees being charged by Blockbuster for late returns and damages. I hated Blockbuster for that.

Exactly,......I quit using them years ago for that reason. The late fees that they charged were way out of line, and many of their customers fled after being burned a few times. Unless they come up with a totally new idea to implement in all of those Blockbuster stores, Dish just made a huge mistake. They cite name recognition as one of their reasons for buying, but Blockbuster is saddled with major negative name recognition, and that will work against them.

What were they thinking,...........

 

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I agree, the blockbuster name is tainted now. Dish will have to come up with a really good strategy to turn this situation around. I used to go there frequently but I got tired of the 5 dollars per movie for 5 days. I want a movie for a night maybe two and pay half of that. Plus the late fees are ridiculous. The last time I went in they tried to convince me to sign up for their online service and I accidentally laughed at the guy. Can't fool me buddy, I know you are bankrupt. I guess he was just doing his job and trying to keep his store open, although I saw the dreaded closing sign got put up a few days ago.

Now you're just mashing it!

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KAdair replied on Thu, Apr 7 2011 3:20 PM

in my opiniion its a bad decision, look at things like netflix 8 dollars a month tons of movies to choose from and netflix will only get better..

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KAdair:
look at things like netflix 8 dollars a month tons of movies to choose from and netflix will only get better..

Yeah, I really like my NetFlix service. You just can't beat the Streaming added to the fast DVD Mailout service that they provide. I cancelled all of my premium movie channel subscriptions because of NetFlix. (and saved a lot of money every month too)

 

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rapid1 replied on Sat, Apr 9 2011 12:34 PM

Funny really as they may still have some brand negativity, but that is so easily countered. OH this is not the old Blockbuster it is the new one owned by DISH who has always been about our customers. Issues dealt with until DISH screws up themselves.

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