OTT Monitor

Dish Networks this week won the auction of Blockbuster's bankrupt video rental business for $320.6 million. According to The Wall Street Journal, Dish will use the assets to enhance its existing video subscription offerings, with many observers predicting Dish may attempt to launch its own Netflix-like streaming subscription service.

Maybe, but maybe not. Recall that Blockbuster's online streaming service was comprised of electronic sell-thru and rentals only, meaning it had not yet negotiated streaming rights with any of its studio partners. As Netflix will tell you, procuring streaming rights to killer content is the most difficult piece of the puzzle. To own the infrastructure is one thing; to have the content to build a legitimate Netflix competitor is another.

So what did Dish really get for its $320 million?

• An albatross of declining physical stores that will weigh on the company for several years, even as court-enforced closures proceed.

• A brand severely wounded by corporate ineptitude and arrogance that denied the inevitability of online streaming and the threat of Netflix. For the average consumer, this is what the Blockbuster brand now looks like:

• The old Movielink online video service infrastructure that is poorly equipped to support a real-time on-demand streaming service.

• Potential entry into market space soon to be populated by powerful brand names including Facebook, Wal-mart, Google, and Amazon.

• An online content portfolio comprised of short-term deals that may not be so easy to renew and, if competing with Netflix is the goal, will cost hundreds of millions of dollars to expand to include subscription streaming rights.

In the end, this isn't about selling satellite TV services through physical stores. It's about building an on-demand video streaming service that can be added to Dish's service portfolio to both expand the value of the core service and compete with companies like Netflix. No doubt Dish will publicly emphasize the first strategy and downplay the second if only to keep shareholders thinking positively as financials take a hit for a few quarters.

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