Dish Network wins Blockbuster at auction

In an auction ending about 1:30 a.m. last night Dish Network won a bid for the bankrupt Blockbuster Inc. for about $320.6 million. According to The Wall Street Journal, the auction ended at Manhattan law firm Cadwalader, Wickersham & Taft after starting in bankruptcy court on Tuesday morning. $228 million of the total will be paid in cash.

Creditors to Blockbuster will receive about $178 million, according to sources. The rest of the $320.6 million will pay for auction and bankruptcy expenses.

“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,” said Tom Cullen, EVP of sales, marketing and programming for Dish.

What will Dish do with Blockbuster?

Dish will apparently use the Blockbuster brand to gain footage against competing satellite company DirecTV. They must also be interested in expanding Blockbuster’s streaming product, which is facing more and more competition as Amazon and even Facebook are offering streaming services lead by Netflix, but is still a growing market sector.

If that’s their intent, Dish doesn’t have much time to build Blockbuster as a streaming brand. Blockbuster has been trailing Netflix and is still known as a “disc” rental service rather than a “digital” service. And, although the company announced last December their a la carte On Demand service was available on 100 different devices, it doesn’t compete with Netflix’s unlimited streaming for $7.99 per month.

The other contemporary business model which Dish could expand is Blockbuster’s kiosk disc rental service. Although Redbox currently dominates this market, Blockbuster with its strong household brand name (which could be fading) would easily compete if more kiosk locations were added.

Blockbuster also started renting video games by mail last summer, a service not provided by Netflix but offered by Redbox (in limited locations) and Gamefly (which is its primary business).

Blockbuster by Mail directly competes with Netflix’s DVD-by-mail service, and offers video games and Blu-ray Discs at no extra charge. Netflix charges $2 more per month for Blu-ray.

The bid from Dish Network still needs to be approved by U.S. Bankruptcy Court Judge Burton Lifland scheduled for tomorrow, April 7, 2011.

In related news Dish Network has acquired streaming distribution rights to Epix films.

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Jeff Chabot

Jeff Chabot

Jeff Chabot writes about technology, broadcasting, and digital entertainment. You can also find him on Gameverse, Gadget Review, and Google+.

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