In an interesting strategic stretch (and I mean hamstring-popping-type stretch), Dish Networks acquired the defunct Blockbuster for (ouch) $228 million. That’s a staggeringly low price for a company that once cornered the video rental market and had one of the most recognized brands on the planet.
While Dish said that it would enter the video business and re-establish Blockbuster as a leader in the video space, I hope that they are talking about something different behind closed doors that hopefully makes more sense. I fear that the physical rental model with 1,700 stores is doomed to fail under the pressure of Netflix and the myriad direct to home video services that are cropping up. And, it seems that Redbox (despite Hollywood’s utter disdain for them), has won a place in the heart of McDonalds-scarfring public that will ensure Redbox some place in this space. So if Dish follows its awkward strategy of restoring Blockbuster to former glory, then Dishbuster they become.
So the question is, what will Dish do with Blockbuster? Well, I feel that real estate is the only thing that makes a difference to Dish. So what then, Dish stores in every neighborhood? I’m very skeptical. Blockbuster has a video service that Dish could use, but I can tell you that there are MANY struggling movie services for way cheaper. And brand equity? That’s a tough strategy to swallow. Seems to me Blockbuster is synonymous with an old brand who saw its day in the 90s.
What am I missing with this acquisition? Why does it make sense? It sure seems like tomfoolery to me.
Here’s a quick blurb from Barrons:
Satellite television provider Dish Network (DISH) this morning said it will spend $228 million to acquire the assets of BlockBuster (BLOAQ) after winning a bankruptcy court auction for the defunct video rental chain yesterday. The deal is expected to close this quarter.
Tom Cullen, head of sales, marketing and programming for Dish, said BlockBuster’sstores, of which there are over 1,700, will complement Dish’s video offerings and provide for cross-marketing opportunities.
It sounds as if Dish expects to actually make a go of this video rental thing:
“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,” said Cullen.