Can Dish plus Blockbuster unseat Netflix?

Earlier this month, Dish bought Blockbuster off the auction block for $320 million. The move was as puzzling to industry watchers as it was intriguing.

Blockbuster, the bricks-and-mortar video chain, had been knocked flat by Internet companies such as Netflix, who were quicker to move from DVD rentals to streaming movies online. It was a tale of fast-shifting fortunes: Blockbuster’s stock was delisted from the New York Stock Exchange this past summer, and it filed for Chapter 11 bankruptcy protection — a steep falloff from the $1.6 billion it was worth in 2002. Netflix, by contrast, has built a market capitalization of $13 billion (up from $288 million in 2002) and now streams content to more than 200 devices. Observers say that under different management, Blockbuster could do better. In a lengthy article in the Harvard Business Review, former Blockbuster chief executive John Antioco said the business was held back by squabbling by former parent company Viacom’s shareholders and management over the company’s online strategy. Viacom didn't want to put its movies and television shows online because it was making more money from theaters, DVD sales and licensing fees with cable companies. While Blockbuster shareholders spent precious time debating the merits of late fees for video rentals and retail store tie-ups with companies such as Barnes & Noble, Netflix was renting videos online and building the technology to stream video over game consoles, laptops and mobile phones. And Redbox was offering cheaper rentals at grocery stores. “I firmly believe that if our online strategy had not been essentially abandoned, Blockbuster Online would have 10 million subscribers today,” Antioco said, “and we'd be rivaling Netflix for the leadership position in the Internet downloading business.”