Wednesday, April 6, 2011

Did Dish (DISH) Overpay for Blockbuster?

While it appears that Dish Network (NASDAQ:DISH) "won" the bidding war for Blockbuster, in the end the question is whether or not they actually won something.

They obviously have the assets, assuming the approval from the bankruptcy court, but there isn't much there to see what value it will add to the bottom line of Dish.

Thomas Eagan, analyst at Collins Stewart, said in a note to clients he only sees a couple of options Dish has with Blockbuster.

It could launch a service similar to Netflix (NASDAQ:NFLX) or use rights owned by Blockbuster to offer new satellite subscribers free DVDs or streaming.

Either way, Eagan said “there would be limitations to either strategy: the studio deals with Blockbuster are likely to be short-termed and may not be renewed; the streaming rights are likely shallow, in terms of number of titles; and Dish may lack the fulfillment infrastructure needed to distribute the titles.”

Tom Cullen, executive vice president of sales, marketing and programming for Dish Network, said in a statement "Blockbuster will complement our existing video offerings while presenting cross-marketing and service extension opportunities for Dish Network."

It will be interesting to see if there is any value whatsoever that can be unlocked from the purchase. At this point the deal looks pricey for what Dish received in return.

Dish was trading at $24.34, up $0.03, or 0.12 percent, as of 12:17 PM EDT.

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