Making Sense of Dish Network's $320 Million Blockbuster Purchase

The satellite TV company gobbles up Blockbuster—but why?

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Dish Network emerged late last night as the winner of a bankruptcy auction of ailing movie rental chain Blockbuster. After filing for Chapter 11 bankruptcy in September, Blockbuster put itself on the market in an auction that began in court on Tuesday morning. Over at the The New York Times, Dealbook chronicles the late-night negotiations between three main bidders, a group of liquidators led by Blockbuster investor Carl Icahn, a consortium of creditors named Cobalt Video and Dish Network. The deal-making left the courtroom around 6 p.m. to the Manhattan offices of law firm Cadwalader, Wickersham & Taft where talks finally ended well past 1 a.m. with a $320.6 million offer by Dish Network to close the deal.

But now Dish owns the video retailer, what does it actually plan on doing with it? The Wall Street Journal reports that their plan involves leveraging the chain's 1,700 brick and mortar locations for signing up new satellite customers. "Satellite-television billionaire Charles Ergen has expressed interest in using some Blockbuster stores to sell subscriptions to its service," the Journal reports. "Dish also is interested in possible synergies from Blockbuster's on-demand business." The company vowed to reestablish "Blockbuster's brand as a leader in video entertainment."

But can the company pull it off? Tech blogger Dave Zatz echoed the confusion of a number of financial observers in a tweet "Dish Network wins Blockbuster auction for $228 million in cash... Does not computer." Adding more skepticism is Mike Fleming at Deadline New York who can't see why Dish Network is paying anything at all for the "floundering" chain. "With the $1 Redbox option available in kiosks at every supermarket, and Netflix's painless streaming program and mail rental system, can anyone remember the last time they even stepped foot in a Blockbuster store?" he asks. "Blockbuster's brick and mortar strategy was exposed as a dinosaur strategy when those other services began to rise, and the behemoth moved too slowly to adapt to the times and protect its turf."

This article is from the archive of our partner The Wire.