Dish's Baffling Blockbuster

8:40 PM What in the wide, wide world of sports is Charlie Ergen up to now?

Jeff Baumgartner, Senior Editor

April 6, 2011

2 Min Read
Dish's Baffling Blockbuster

8:40 PM -- Dish Network LLC (Nasdaq: DISH) is set to breathe new life into the corpse of Blockbuster Inc. in a $320 million deal, but the general reaction since the announcement has been: What in the wide, wide world of sports is Charlie Ergen up to now? (See Dish's Latest Buy Is a Blockbuster .)

Sanford C. Bernstein & Co. Inc. analyst Craig Moffett, who follows Dish, noted today that investors will "no doubt, squint and see connections." But for him, "the deal is strategically puzzling."

Exhibit 1A is Blockbuster's shrinking store base and revenues, which dropped 17 percent to $3.5 billion for the 12 months ended Oct. 3. Moffett wonders if Blockbuster will become a cash drain on Dish, since the company intends to use stores as a marketing tool for the satellite TV service, despite incongruities in the sales process: "Would you like a satellite dish with your rental?"

He thinks the more intriguing aspect of the deal is Blockbuster's streaming service, which has struggled but could fit in with Dish's Slingbox service. But Moffett doesn't completely buy that either. "The risk is that the synergies here turn out to be more of a soundbite than a strategy," he writes.

Dish, which has been throwing millions at other bankrupt companies to help build a wireless spectrum story, declined to comment on its Blockbuster strategy, noting that the bankruptcy court hasn't approved the deal yet. Dish believes the deal will close sometime in the second quarter. (See Charlie Ergen's Spectrum Grab .)

Here are a couple of other reactions:

  • "Ergen continues to look for distressed assets selling at bargain prices. [Blockbuster] could transform Dish into a much more viable online competitor than it is now," RBC Capital Markets analyst Ryan Vineyard said. Wedbush Morgan Securities analyst Michael Pachter thinks a total liquidation is a possibility.

  • Kaufman Bros. LP analyst Todd Mitchell believes Dish could end up launching a VoD service that could boost Dish's own offerings while using Blockbuster's over-the-top capabilities to compete on a standalone basis against Netflix Inc. (Nasdaq: NFLX).

    — Jeff Baumgartner, Site Editor, Light Reading Cable

About the Author(s)

Jeff Baumgartner

Senior Editor, Light Reading

Jeff Baumgartner is a Senior Editor for Light Reading and is responsible for the day-to-day news coverage and analysis of the cable and video sectors. Follow him on X and LinkedIn.

Baumgartner also served as Site Editor for Light Reading Cable from 2007-2013. In between his two stints at Light Reading, he led tech coverage for Multichannel News and was a regular contributor to Broadcasting + Cable. Baumgartner was named to the 2018 class of the Cable TV Pioneers.

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