Blockbuster, the one-time king of the home video market, has found a buyer to take it out of trouble. Dish Network (the telco/satellite company) looks to be the leading contender for an acquisition, at a price tag of $320 million. Whether that figure is a bargain or not, depends on who you ask. Regardless, it’s clear that Dish wants Blockbuster in a play to build a branded destination for digital movie rentals. No matter how much brand awareness it may have lost in the age of Netflix, it’s tough to argue that “Blockbuster” is not a great brand to have for luring consumers who want to find new release movies. From a Reuters report on the pending deal:
Dish Network expects to pay about $228 million in cash to acquire Blockbuster. The money will go toward paying off the company’s creditors, which include Icahn and other bondholders as well as movie studios, who are owed more than a combined $1 billion.
David Berliner, a turnaround advisor for BDO Consulting said the deal reminded him of Cablevision’s purchase of The Wiz electronics stores as a way to sell it cable TV subscriptions. Blockbuster has a similar agreement with Comcast Corp to install kiosks in its stores to sign up customers for the cable company’s television service, which competes with Dish. Berliner said new management with a background in satellite technology could breath new life into the Blockbuster business.
“Maybe they can do an even better job with Blockbuster online in terms of deals with streaming video,” said Berliner.
While Dish will likely absorb some initial losses from the stores, Berliner said the deal has upside.
“They have to continue to move gradually out of bricks and mortar store and get more into online and take advantage of that opportunity,” Berliner said.
Blockbuster had a market cap of more than $5 billion at its peak in 2002, but came under pressure from mail-order and digital competitors such as Netflix Inc.