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Will Dish be able to keep Blockbuster kicking a bit longer?
Blockbuster has a new owner. Dish Network announced Wednesday morning that it has agreed to acquire all of Blockbuster’s assets after winning a bankruptcy court auction for the floundering movie rental retail chain. Dish Network’s bid was valued at $320 million, $228 million of which will be paid out in cash. The acquisition will prevent Blockbuster’s assets from being liquidated, which will keep it floundering for some time more as Dish Network looks for a way to spiff it up and put it back in the running with the more successful movie rental businesses, like Netflix, Redbox, Amazon, and more. Dish Network, a Fortune 200 company, serves some 14.1 million customers.
The winning bid came at 3 a.m. EST, according to an individual who attended the auction. Other bidders included billionaire investor Carl Icahn, a group of lenders, two liquidators, and South Korean Internet service provider SK Telecom Co. The bidding baseline was set by a $290 million “stalking-horse” offer from Cobalt Video in February.
Since filing for Chapter 11 in September 2010, Blockbuster stores have shrank to 2,400 U.S. locations from 3,300 last September, and the company has plans to cut another 700 stores later this month. The company’s Chapter 11 petition lists $1.02 billion in assets and $1.47 billion in debt.
Despite Blockbuster’s lackluster health, Dish Network EVP of Sales, Marketing, and Programming Tom Cullen believes the acquisition is a smart move.
"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. 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."
With 47 million customers worldwide and over 125,000 movie and game titles in stock, Blockbuster has made several attempts to tweak its business model in recent years in an attempt to keep pace with its major competitor, Netflix, including creating its own mail-delivery DVD service. To keep up with Redbox, Blockbuster started installing similar kiosks in stores across the country, and to keep up with digital movie streaming services like Amazon, Blockbuster launched a digital streaming service. But none of those efforts have addressed the one major advantage that Netflix, Redbox, and streaming services have over Blockbuster: no brick-and-mortar stores. Since they don’t have to pay the cost of upkeep on a physical store, the companies have more capital to funnel back into their services.
Image source: Cybertheater.com
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