After winning the bankruptcy auction for Blockbuster last Wednesday, Dish Network could be looking to rewind Netflix’s lead in the digital video market.
The satellite TV provider, which offered $320.6 million for Blockbuster’s assets, said it would use the chain’s video rental services to enhance its existing offerings. Blockbuster, like Netflix, rents movies and TV shows via DVD and Internet streaming.
Dish still faces significant hurdles in keeping Blockbuster’s business running, such as renewing contracts with movie studios and securing rights to stream content online. Still, the deal could be the bold move Dish needed to make, said Erik Ugland, an associate professor of broadcast and electronic communication.
“It’s hard to know whether this will pay off and where it might lead,” Ugland said in an e-mail. “But it’s a move they had to make to keep up with their challengers.”
Dish expects to pay only $228 million for Blockbuster after fine-tuning the deal to account for available cash and inventory.
Blockbuster’s online streaming services are likely far more important to Dish than its DVD rentals, Ugland said.
“People are moving away from DVDs, and the future is entirely about streaming and video on demand,” he said. “But buying Blockbuster allows them to go head-to-head with both Netflix and DirecTV.”
DirecTV, Dish’s primary competitor in the satellite TV market, has also started offering online video streaming through its DirecTV Cinema service. The Blockbuster deal could give Dish a boost in the competition, said Sumana Chattopadhyay, an assistant professor of broadcast and electronic communication.
“So far Dish has been perceived as the cheaper alternative to DirecTV,” Chattopadhyay said in an e-mail. “This move might make it more than just that by giving it an extra edge and offering more services to customers.”
But competing with Netflix could be a bigger challenge, Ugland said, because of Netflix’s established customer base and integration with devices like Microsoft’s Xbox 360 gaming console.
The convenience of using Netflix on an Xbox is hard to beat, said Hari Prasad, a freshman in the College of Arts & Sciences.
“I can now play games and watch thousands of movies on one machine,” Prasad said. “As long as my Netflix stays the same, I’ll be happy.”
Netflix’s lead in the digital video market will be hard to take away, said Richard Robinson, an associate professor of marketing.
“Netflix is on a roll, not to be unseated in the near term,” Robinson said in an e-mail.
The Blockbuster deal could also be a move by Dish into the larger realm of Internet TV, an emerging field in which TVs themselves are Internet-connected. But Robinson said such a move would likely be unsuccessful due to Dish’s lack of name recognition compared to its competitors.
Nevertheless, the Blockbuster deal should allow Dish to at least turn up the volume on the digital video competition, Ugland said.
“Dish Network can now make some noise because it can offer customers a combination of services that nobody else is offering: satellite, video-on-demand, streaming and mailed DVDs,” Ugland said.