April 9, 2011

Dish's Blockbuster buy may keep icon alive

NEW YORK - Dish Network Corp.'s agreement to buy Blockbuster Inc.'s assets out of bankruptcy could keep Blockbuster's blue-and-gold logo from disappearing.

But whether Dish can use Blockbuster's brand, stores and streaming-video capabilities to create services more relevant to the age of Netflix and Hulu remains to be seen.

Dish, headed by billionaire Charles Ergen, won a two-day bankruptcy auction for Blockbuster that stretched into the early hours of Wednesday morning with a bid valued at $228 million in cash.


Dish has so far been mum about specific plans for Blockbuster, but in its announcement, the company highlighted the 1,700 stores that will remain and "multiple methods of delivery."

Dish spokeswoman Francie Bauer said the company, based in Englewood, Colo., would not comment further since the deal must receive court approval.

A hearing for that approval is set for Thursday. Dish expects the deal to close in the second quarter.

Satellite TV providers have been losing subscribers as cheaper alternatives such as Hulu and Netflix become more popular.

Ergen has in past calls with analysts praised Netflix, which offers unlimited streaming video at a monthly price along with a DVD-by-mail service.

Acquiring Blockbuster will make Dish a more viable competitor in streaming video online. It's doing so at a price easily affordable for Dish, which had nearly $3 billion in cash as of Dec. 31.

Dish also recently picked up satellite provider DBSD North America, which was also reorganizing under bankruptcy protection, for $1 billion.

"Ergen continues to look for distressed assets selling at bargain prices," said RBC Capital Markets analyst Ryan Vineyard. Blockbuster "could transform Dish into a much more viable online competitor than it is now."

Dish beat out billionaire investor Carl Icahn and a group of debt holders for Blockbuster, which filed for Chapter 11 bankruptcy protection in September.

Icahn had teamed with a group of liquidators. Analysts say it was likely he would have liquidated the company. Dish has more of a vested interest in keeping Blockbuster a going concern, but analysts are split about whether Dish will keep the stores open.

Some thought Dish would keep at least some stores open.

"In order to get the most from the investment, Dish Network needs to keep the Blockbuster brand top of mind with consumers, and that means in kiosks in drug stores and physical store locations," Wall Street Strategies analyst Brian Sozzi said.

But others thought a total liquidation might be a possibility.

"Dish has zero retail capability at present, and therefore lacks the scale or synergies to benefit from the operation of Blockbuster retail stores," Wedbush analyst Michael Pachter said.

Either way, Dish and Ergen, who also chairs former Dish parent EchoStar, is gambling the deal can help reinvent Dish as consumers' TV and movie-watching habits evolve.

by Mae Anderson Associated Press Apr. 7, 2011 12:00 AM




Dish's Blockbuster buy may keep icon alive

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