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Dish Network Wins Blockbuster Auction

6 Apr, 2011 By: Erik Gruenwedel

Fate of more than 1,700 stores not immediately known

Satellite TV operator Dish Network early April 6 emerged the winner in the sale auction of bankrupt Blockbuster Inc. with a winning bid of $320 million, including $228 million in cash.

Englewood, Colo.-based Dish said it would incorporate Blockbuster’s brand and studio assets to cross promote physical and digital distribution of movies through its satellite platform. The deal could help revitalize Dish in a satellite market increasingly dominated by DirecTV — the latter coming off a record fiscal year.

El Segundo, Calif.-based DirecTV is expected to launch the first premium VOD studio movies later this month.

The winning offer bested a determined effort by former Blockbuster board member and investor Carl Icahn and separate bid from of group of senior lenders dubbed Cobalt Video Holdings. South Korean telco SK Telecom submitted an all cash bid of $284 million, which was rejected.

"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," said Tom Cullen, EVP of sales, marketing and programming 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."

Michael Pachter, analyst with Wedbush Morgan Securities in Los Angeles, believes the writing is on the wall for Blockbuster stores.

"I think that they will close and liquidate the stores, as it doesn’t fit with any of their core competencies," Pachter said. "My guess is that they value the brand and the streaming technology and want to use both to offer Internet streaming of movies, but I think that they will hire one of the liquidators [Great American Corp.] that bid on the assets to run a sale for them."

Indeed, Blockbuster's rental market share fell below 20% (19.9%) in 2010 compared with nearly 23% in 2009, according to IHS Screen Digest. The research firm said Blockbuster ended last year just 1% ahead of Redbox in market share, and down 43% to Netflix with 34.8% market share. 

The sale to Dish, which is expected to close in the second quarter, still requires approval from U.S. Bankruptcy Court Judge Burton Lifland, who is holding a hearing on the winning bid April 7.


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