Satellite television provider DISH Network has won the auction to purchase the bankrupt Blockbuster Video chain. The winning bid was for $320 million with $228 million of it being in cash.
As we reported on Monday, Blockbuster Video was up for sale due to its Chapter 11 bankruptcy filing dating back to last Sept. While some bidders, including the infamous Carl Icahn, were looking to liquidate at least a portion of the company,
The deal, which is still pending approval from U.S. Bankruptcy Judge Burton Lifland, will see the satellite television provider keeping the lights on in the retail store locations as well as expanding its digital distribution outlets. “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,” said Tom Cullen, executive vice president of Sales, Marketing and Programming for DISH Network. “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.”
Those challenges that Mr. Cullen speaks of are the fact that the company listed assets of $1.02 billion and debt of $1.47 billion. Currently the chain has over 2,400 stores in the United States, but around 700 locations are closing by the middle of the month to arrive at the 1,700 that DISH will now take over.
Despite the debt load of the company, DISH has just acquired 1,700 retail locations where it can cross promote its satellite service, not to mention adding advertisements to the DVD rental kiosks the company owns and the potential to bolster on demand video offerings through its main business. Essentially DISH just picked up a heck of a bargain, and one that should make DirecTV sit up and take notice.
There are still hurdles for the company to overcome, such as competing with Redbox and Netflix, but for now we imagine the goal is to simply spread the DISH brand name in ways not yet explored. We’re sure that there will be many changes to how Blockbuster does business, and there is every chance that more locations will be closed, but this could be an entirely new world for the once mighty retail chain.
What do you think? Was it a good idea for DISH to purchase the bankrupt video chain?