Dish Network has abandoned plans to turn Blockbuster into a streaming video and mail-order DVD service, further clouding the future for the once-dominant video rental chain.
Dish Network co-founder and chairman Charlie Ergan told Bloomberg that Dish Network’s plans for its $350 million Blockbuster acquisition hinged on sales of mobile devices bundled with streaming video. Dish last year agreed to acquire $3 billion worth of wireless spectrum, and had intended to offer wireless service on new mobile devices, using Blockbuster stores as retail locations.
However, the regulatory approval process has gone slower than expected. In the meantime, Dish is stuck with hundreds of unprofitable Blockbuster rental stores. Although Dish has already shuttered the majority of Blockbuster locations, about 900 remain in the United States.
Without a wireless service, Dish and Blockubster would have to start from scratch as a streaming and DVD-rental service – with no inherent reason for consumers to pick the service over Netflix. Ergan told Bloomberg that the company no longer has plans for a nationwide streaming or mail-order DVD service. (Dish does offer a Blockbuster-branded streaming and DVD service, but only as a $10 add-on to existing pay TV packages.)
Even if Dish had received regulatory approval for a wireless network sooner, the success of Blockbuster would have been a long shot. Netflix streaming is a hit because it works not only on mobile devices, but on game consoles, PCs, and tablets. To build a comparable service would have taken a lot of work.
There's also no guarantee people would have flocked to Dish's network fast enough to justify keeping more Blockbuster locations up and running. People tend to stick with the carrier they're using, and it's unclear if Dish would have been able to have good enough wireless service or handsets to convert people in droves (or at all).
Not all is lost for Blockbuster, but the situation looks bleak. Ergan told Bloomberg that Dish is talking with cable networks to turn Blockbuster into a streaming service for live shows. However, even if this happens, it will still be years away.
As for the remaining Blockbuster stores, some of them do make money, mainly in rural locations, but Bloomberg notes that Dish could still turn a profit on its $350 million acquisition by closing and selling all the 1,700 stores that it purchased. “Worst case we break even or make a little bit of money,” Ergan said.