After dropping $320 million to acquire Blockbuster (OTC:BLOAQ), Dish is now faced with a lot of choices, most notably: what can be done with the 1,700+ retail locations that are still in operation? It's a tough decision, to be certain. Earlier this morning, Bloomberg spoke about the rumors that Dish may convert some of the Blockbuster locations to Dish sign-up centers. However, Bloomberg's sources say that the company's CEO, Charles Ergen, is not interested in getting into the retail business.
The official (though somewhat vague) word on the buyout comes from Dish Network's Executive Vice President of Sales, Marketing and Programming, Tom Cullen. “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,” Cullen said in a press release. “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.”
While Cullen may not have revealed Dish's full intensions with the company, he certainly left a few clues.
“Highly Recognizable Brand”
This, obviously, is the primary reason for acquiring a company like Blockbuster. While the Blockbuster brand has certainly taken a beating in terms of consumer satisfaction, it is still, as Cullen puts it, “highly recognizable.” That recognition could help Dish in the marketplace, where it must find a way to differentiate its on demand offerings. From a marketing perspective, Dish could brag about being the only satellite provider that gives consumers a “Blockbuster night.”
“Multiple Methods of Delivery”
Was Cullen merely reiterating Blockbuster's current features? Or are Dish's top executives seriously impressed with this aspect of the company? If the latter is true, then we might see the retail locations survive a bit longer than expected.
At the very least, Dish is likely to take advantage of Blockbuster's By Mail offering and use it to promote its satellite service, leading us to…
“Cross-Marketing and Service Extension Opportunities”
This one is hard to believe. While Dish could easily use the existing Blockbuster locations to support its satellite service, it seems unlikely that the company intends to do so for the next several years. More likely, this would serve as a transitional phase to wind down the old Blockbuster format while simultaneously promoting the Dish brand.
As far as “service extension opportunities” are concerned, Cullen's words may be hinting at deals for Dish and Blockbuster customers alike. Ex: regular Blockbuster customers could receive coupons for a low-cost, six-month “trial” of the Dish service, while Dish customers could receive coupons for Blockbuster's By Mail offering.
“Faces Significant Challenges”
That's a bit of an understatement, wouldn't you say? Any company in a competitive market faces “significant challenges.” But Blockbuster is in a market that now belongs to Netflix (NASDAQ:NFLX). That isn't going to change just because of this acquisition.
“Re-Establish Blockbuster's Brand as a Leader in Video Entertainment”
Maybe Dish will, maybe Dish won't. But if the company is serious about re-establishing Blockbuster's brand, it needs to lure us with a ton of free content.
Over the past few years, Hulu has grown tremendously by giving consumers free episodes of new TV shows, entire collections of old TV shows, and a handful of movies. The company would love nothing more than to charge us a monthly fee for everything that we watch. But for now, it only charges for its premium content.
Dish needs to do the same with Blockbuster.com. The company should start by striking a deal with film studios to stream select films (recent films) for free. Dish could take the loss now by paying the studios whatever they would normally make from a paid stream, and benefit later by earning the interest of millions of consumers. Dish could soften its short-term loss with pre- and post-film advertisements, sponsorships, and other deals.
The Future and Beyond
If done properly, Blockbuster could be more than a catalyst for Dish subscriptions; it could become its own streaming empire. Under current management, this hasn't happened. The company squandered every opportunity it had and took too long to adapt to Netflix's business model.
But with a few adjustments, a willingness to offer free content (desirable content), and the realization that Blockbuster movies should not be exclusive to Dish subscribers, there might still be hope for a comeback.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.