Thursday, November 7, 2013

Why Did Dish Network Buy Blockbuster?

When Dish bought the Blockbuster chain a few years ago, the question most people asked was what was their to gain from buying a brick and mortar establishment that was already seeing loss of market share in the DVD rental business.  Netflix was struggling to convert from mail to streaming and Dish was still stuck with a brick and mortar business competing with a subscription mail business.  Clearly they were a step behind and a dollar short.  But Dish came in and bought the company, presumably for its content business.  And since then, nothing.  So what was Dish thinking and why did they spend their money on a losing investment that had continued to bleed dollars?

Stores were closed along the way and finally, this week, the announcement that the rest of the stores and mail order business was closing down.  From the official release, "'This is not an easy decision, yet consumer demand is clearly moving to digital distribution of video entertainment,' said Joseph P. Clayton, DISH president and chief executive officer. 'Despite our closing of the physical distribution elements of the business, we continue to see value in the Blockbuster brand, and we expect to leverage that brand as we continue to expand our digital offerings.'"  But if the intention was to push the digital offerings, what has Dish been doing since they purchased the Blockbuster brand to compete in this space. 

While Amazon, Netflix, and Hulu have been investing in original content and building out their online brand, Blockbuster has been eerily quiet.  The brand name once synonymous with video content rentals has lost its leadership brand and its legacy stature.  It is a shell of its former self.  Dish has done little if anything to promote or differentiate itself in the online, digital space.  And with the loss of their stores, their awareness could even drop below Redbox, who continues to operate its vending business as it too finds a digital footprint.  So Dish has a big decision to make, do they put a ton of investment back into the Blockbuster brand to compete more effectively against Netflix and others, or is its best move to simply take the full loss and write off.  I am suspecting the latter is the better move.