Why Did Dish Network Acquire Blockbuster: A Strategic Move in the Streaming Video Market
Why Did Dish Network Acquire Blockbuster: A Strategic Move in the Streaming Video Market
Dish Network, a major player in the entertainment and telecommunications industry, recently made a significant move by acquiring Blockbuster. This acquisition, made for an option price of 320 million dollars, is deeply rooted in a strategic plan to enhance its position in the highly competitive streaming video and retail game markets. Understanding the context of this acquisition and its underlying motivations is crucial for grasping the long-term implications for Dish Network and the broader market landscape.
Understanding Real Options in Business
In business, a real option is a right to undertake certain actions in the future, essentially providing flexibility to corporate managers in their investment decisions. Similar to the stock option, a real option requires an exercise price, which in this case, is the 320 million dollars that Dish Network paid for the acquisition.
This payment for the Blockbuster brand marked the exercise of a real option for Dish Network in the realm of media and entertainment. The acquisition is not just about the immediate value of Blockbuster's assets but also about the future potential it carries. Dish Network paid this price to play a significant role in the streaming video game, with a lesser focus on retail games.
Competitive Advantage in the Streaming Video Market
One compelling reason behind Dish Network's acquisition of Blockbuster is the potential competitive advantage it offers in the streaming video market. Blockbuster, despite its bankruptcy, still possesses a few valuable assets that can be leveraged to its advantage. For instance, it offers a potentially viable alternative to streaming giants like Netflix and Hulu. This alternative provides Dish Network with a strategic foothold in the DVD-to-home market as well as the streaming video market.
Increasing the Competitiveness with DirecTV
In the ongoing battle between DirecTV and Dish Network, every edge counts. Acquiring Blockbuster gives Dish Network a strong card to play. A viable streaming platform is a key part of the competitive strategy between the two companies. The acquisition of Blockbuster aligns with Dish Network's broader goals of expanding its distribution channels and enhancing its user experience.
Valuable Relationships and Brand Recognition
Apart from the streaming capabilities, Blockbuster's bankruptcy has not eroded its valuable relationships. The company still boasts a network that can help with distribution and sales in the video market. These relationships, along with the strong brand recognition, make the acquisition a smart move for Dish Network.
Although Blockbuster is often associated with negative connotations, such as late fees, the brand is a familiar one. The blue and gold logo of Blockbuster is strongly recognizable and still carries a positive image of movie rentals. This brand recognition can be harnessed to attract more customers to Dish Network's services.
A Sweet Deal at a Bargain-Basement Price
Considering the price they paid—320 million dollars—Dish Network is getting a lot of assets for their money. Along with the streaming video platforms, they also obtained distribution contracts and 1700 retail outlets to promote their services. This acquisition is not just a one-time transaction but a significant step towards building a robust and flexible future for Dish Network in the digital entertainment market.
Conclusion
In conclusion, the acquisition of Blockbuster by Dish Network is a strategic move that combines real options, competitive advantage, valuable relationships, and brand recognition. It positions Dish Network to play a more significant role in the streaming video market, challenge the dominance of giants like Netflix and Hulu, and compete with DirecTV. While the long-term success of this acquisition remains to be seen, it signals a bold and forward-thinking approach by Dish Network in the ever-evolving world of media and entertainment.