Dish deal for Blockbuster was a long-shot from the start

January 7, 2014 | By More

Charlie Ergen’s plan to compete with Netflix through Dish Network’s acquisition of the bankrupt Blockbuster Video business began to go awry almost as soon as the company acquired it in April of 2011.

blockbuster-closing

The $322 million in cash and $87 million in liabilities Dish paid for the once-high flying DVD and game retailer looked like a steal… until the FCC dragged its feet approving the Satellite TV provider’s plan to launch a new wireless broadband service.

That delay said Ergen, Dish’s chairman, and the rapid ascension of Netflix as the video streaming service of choice in the U.S., provided too much for Blockbuster.

dish network-blockbusterDish — which as of a year ago had only 900 Blockbuster stores still operating — announced it was throwing in the towel on the DVD retail and by mail rental service, closing the 300 remaining stores and distribution centers by the end of January 2014. Mail distribution ended in December 2013. Franchised and licensed stores will remain open and Dish said it would keep the licensing rights to the Blockbuster brand and its video library.

Dish will continue to deliver the Blockbuster@Home streaming service to Dish customers, an offering that includes more than 15 movie channels plus some 20,000 movies and TV titles, as well as its transactional VOD service, Blockbuster on Demand.

“This is not an easy decision, yet consumer demand is clearly moving to digital distribution of video entertainment,” said DISH President and CEO Joe Clayton. “We continue to see value in the Blockbuster brand, and we expect to leverage that brand as we continue to expand our digital offerings.”

How it’s leveraged, however, is still up in the air. The company a year ago said it had abandoned hopes of turning Blockbuster into a streaming power like Netflix.

During an AllThingsD program, Ergen said the company jumped into the streaming business “too late,” noting: “Under the radar [Netflix] got critical mass and [now] can buy any program that they want to.”

“We didn’t have the guts to buy the content and start from scratch,” he said.

In October 2012, meanwhile, he said “You make a lot of mistakes in business. I don’t think Blockbuster is going to be a mistake, but it’s unclear if that’s going to be a transformative decision.”

If nothing else develops from the Blockbuster deal, Ergen even then was saying Dish still would likely have made its investment back.

“Worst case, we’ll take our money after having wasted some time, not much money, and life goes on,” Ergen said.

Here’s Dish´s release.

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Category: ANALYSIS

Jim ONeill

About the Author ()

Jim O’Neill has been a business journalist since 1992, and has been writing about the digital media industry since 2007. He formerly was the editor of industry journals FierceIPTV and FierceOnlineVideo, and has worked as an industry analyst for international research firm Parks Associates. He currently is CEO and Editor of theConvergence.tv, a newsletter that takes a deeper look at the trends and happenings in the digital media industry, and continues writing research and white papers on a variety of topics in the sector. He can be reached at jim@theconvergence.tv

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