Bankrupt Blockbuster Acquired by Dish Network - Why'd They Do the Deal?

My how the world of video is changing.

After spending years obliterating local video stores into submission with ubiquitous locations, outlandish predatory pricing and sheer market leverage, Blockbuster went up on the blocks, the victims of being too big, too slow and too late to the game in embracing on-demand viewing.

For years Blockbuster's business model was based largely on billing and collecting late fees for their videos. Ultimately, how sustainable can any business be when their number one source of revenue comes from the thing that pisses customers off the most?

Remember the scene in "Fight Club" where Tyler Durden’s minions erase tape after tape after hours in a Blockbuster store in protest for their brutally heavy-handed competitive tactics? That was so 1999.

Instead of a crack team of anarchist brutes wielding magnetic erasers, Blockbuster was wiped out by Redbox, Netflix, and a new breed of online viewing options aimed at making it easy for customers to watch videos when they wanted - eliminating crappy and exorbitant late charges in the process.

Those faster, more nimble and innovative firms were able to beat the almighty behemoth to the on-demand punch and left a trail of blood in the process, so the vultures and corporate raiders could pick over the scraps of their bloated corpse.

At least 3 potential acquirers, including billionaire financier Carl Icahn and South Korea’s SK Telecom Co., were in the running. According to the WSJ, The winner of the decadent free-for-all was Dish Network, who, for $321 million (with an “m”) will quickly be able to take advantage of at least the Blockbuster brand name, which still carries some cache for those decrepit old souls who are ancient enough to remember what a DVD is.

“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,” Tom Cullen, Executive Vice President of Sales, Marketing and Programming for Dish Network 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.”

Dish Network will doubtlessly also try to utilize the Blockbuster online video on-demand library as part of its subscription option to customers, though it’s unclear what type of agreements Blockbuster was able to secure with content providers, and whether those agreements are worth a hill of beans post-merger.

As anyone who has been involved in a merger can tell you, it can be difficult to realize the value of a diminishing brand, particularly if integrating technology is a key component.

That being said, there was a time not too long ago where Blockbuster was to video what Burger King is to burgers – a safe, reliable and ubiquitous brand with unbelievable name recognition amongst the American public. If the Dish Network can realize a fraction of that brand equity, then $321 million kinda seems like a steal.