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Dishing the Brand

6 Apr, 2011 By: Thomas K. Arnold

With Dish Network buying Blockbuster Inc. at auction for a bid of roughly $320 million, the digital delivery sweepstakes is about to get a lot more intense.

Dish is in a three-way battle for consumer eyeballs — eyeballs attached to bodies that want to watch first-run movies without making a trip to the rental store, the supermarket or even their own mailbox.

On one front Dish is fighting satellite rival DirecTV. Both get to offer most new releases for “transactional” viewing the same day they come out on disc. Up until now, DirecTV has had the edge, both in subscribers (19.2 million to Dish’s 14.1 million, as of the end of 2010) and in marketing. When studios began holding back hot new releases from rental leaders Netflix and Redbox, DirecTV launched a media blitz crowing about the street-date availability of first-run movies from Warner, 20th Century Fox, and Universal Studios — as did Blockbuster, before it ran out of money. Dish was conspicuously quiet.

On another front, Dish is fighting the cable companies that are scrambling to launch and improve their own premium VOD channels.

And on a third battleground, Dish is squaring off against the telecoms, who also are engaged in a continual game of streaming one-upmanship.

How can the purchase of Blockbuster give Dish the upper hand? It all depends on what Dish does with its new acquisition. And surely, but surely, there is a plan. As David Berliner, a consultant at BDO Seidman LLP in New York who specializes in restructuring and insolvency issues, told the Bloomberg news service, “It doesn’t make sense to buy a melting ice cube unless you’ve got a plan to increase revenue.”

My hunch is that Dish sees the $320 million it is spending to buy Blockbuster as an investment in its digital future. Dish didn’t buy Blockbuster for the stores, or for the inventory. Dish bought Blockbuster for the brand, and will leverage the brand to position itself as the No. 1 source of VOD. I wouldn’t be surprised it a name change, to something like the Blockbuster Movie Network, is in the future. Imagine this: “Blockbuster used to be the place where America rented its videos. Now, Blockbuster is the place where Americans watch their movies—in the comfort of their own homes. The old Blockbuster did away with late fees. The new Blockbuster is doing away with stores, vending machines and even your mailbox — so your lazy ass never even has to leave the couch.”

I jest, of course. But only in part. Rest assured that the Blockbuster brand will live on, even if the stores don’t. The vending machines — yeah, I think they’ll stay, too, considering NCR Corp. owns and operates Blockbuster Express kiosks under a license agreement. Redbox still does an awful lot of business, and this way Dish has some skin in that game, as well.

Dish may also use the fact that Blockbuster went belly-up owing tons of money to the studios to its advantage. “Hey, Warner. Hey, Paramount. Yeah, we’ll pay you. But what about those windows, eh? I know we get some movies the same day they come out on DVD and Blu-ray Disc. But it sure would be nice to get everything …”

These next few months should be interesting.

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