Wednesday, April 6, 2011

Blockbuster - Under new management

The Story:

Blockbuster was recently purchased by Dish Network, for $320 Million (though they will likely only have to pay $228, due to Blockbuster's debt).

This is my opinion:

This may be a huge win for Dish Network providing they understand what they are doing with the new brand. My guess is that they could use this partnership to compete heavily with Netflix and Redbox exploiting their relationships with networks and studios to provide content through streaming video and via the mail. I don't know that this is enough to compete, so I would take it a step farther than just building up what Blockbuster had tried before their fall.

The potential for the Retail locations -

Blockbuster has/had 1700 retail locations across the country. I would turn these into Dish Network corporate stores, while retaining the Blockbuster branding outside and adding Dish network branding to the logo. Inside of these stores I would continue to do some movie and game rental, but it would be more about educating customers around how to stream movies using the streaming service (a service which I would build into the Dish Network boxes). I would also use these stores to promote premium services offered by Dish Network and even attempt to partner with a retailer like Best Buy, Wal-mart, or Target to be able to sell TVs from these locations.

I would recommend selling contract TVs (similar to the discounts on Mobile Phones for signing a 2 year contract). TVs that sell for 100-300 would be free, and larger more expensive TVs would have significant discounts, as long as customers sign a 2+ year contract for service. Imagine a free 55" 3D-LED for free for signing a 5 year contract to Dish, how many people would be on board with that.

Crushing Netflix, Redbox, etc.

Netflix and eventually Redbox were the harbingers of doom for Blockbuster. Now that it is under the wing of a larger company it is time to return the favor for these companies (full disclosure I am a Netflix customer and love Netflix instantly streaming). I would start with attempting to offer more content and provide new content as fast as possible to the Blockbuster online side of the business. I would also heavily push for the video game side of the mail business to be an add on to the movie subscription, or perhaps you could have a subscription model where a customer can have X discs out for $XX.XX per month depending on the total number of discs they want and they could choose to divide that between movies and video games. It would provide a Value Prop that isn't offered by Netflix or Redbox (you would also be competing against gamefly, gamestop, and valve/steam).

In addition to adding value props, because Dish is a large company that has revenue streams coming in from many different places, they could also offer the "instant" streaming movies for a price that may not net them any profit, or a slight profit margin to drive their competition out of business (see Wal-mart).

Leverage the Future of TV

With more and more people moving away from traditional TV service this can give Dish the edge they need to be an innovator of the future of TV. This purchase coupled with their purchase of Slingbox could give them the tools they need to make some huge leaps and bounds, I will sit back and wait to see if they can combine their assets to make something greater than a sum of the parts.

Let me know what you think.

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