If you were planning dipping into your rainy-day fund on the off chance you might have been able to buy one-time home video giant Blockbuster at a discounted bankruptcy price, stop. The former king of video rentals has been sold at auction, where Dish Network outbid other interested parties -- including Carl Icahn -- and acquired the bankrupt business for $320 million.
Dish has been on a buying binge lately. Last month, the satellite service provider acquired DBDS North America, a satellite- and land-based communications company, for $1.4 billion. In February, they bought Hughes Communications, one of the largest providers of broadband satellite services, for $1.33 billion under owner Charlie Ergen's EchoStar Corp.
Analysts speculate that the Blockbuster purchase was inspired by Dish's desire to gain access to the company's online library in order to compete with services like Netflix. What this means for the brick-and-mortar stores remains to be seen, but the days of going to a physical store to rent movies seems about as antiquated as having to crank the handle on the front of your car to start it every morning.
Dish Network's executive vice president of sales, marketing and programming had this to say about the deal: "Blockbuster will complement our existing video offerings while presenting cross-marketing and service extension opportunities for Dish Network."
While Blockbuster's online rental service never quite took off the way the company hoped, it was primarily because Blockbuster itself wasn't fully committed to it. In the hands of another company, one focused on making the online rental component the cornerstone of its operation, it's feasible that Blockbuster could compete with market leader Netflix. Whether that actually happens remains to be seen.
Dish's deal includes roughly $228 million in cash and still needs approval from the court before it's made official -- something that should happen this Thursday.
Reuters reports that famed investor Icahn offered $310.6 million for the ailing company, with some of that amount rolled into notes in a bankruptcy loan. At its peak in 2002, Blockbuster had a market capitalization of more than $5 billion. Oh, how the mighty have fallen ...