you fit into me
like a hook into an eye
a fish hook
an open eye
-- "You Fit into Me," Margaret Atwood, 1971

So the long and sordid saga of Blockbuster's (OTC BB: BLOAQ.PK) demise is winding down: DISH Network (Nasdaq: DISH) won an auction for the chain's assets, which was approved by a bankruptcy judge yesterday.

And by "won," I really mean "lost."

Requiem for a Dream
This is a heap of bad mojo for DISH in its struggle to eclipse -- or at least equal -- larger and richer rival DirecTV (Nasdaq: DTV). Looking at the situation with a cheerfully optimistic eye, you'd see DISH spending $320 million for a company with an enterprise value of $831 million, writing off the expensive debt as part of the bankruptcy proceedings, and walking away with the following haul:

  • An established brand name.
  • About 1,700 physical store locations nationwide.
  • A finger in every video-rental pie, from DVD-by-mail subscriptions and strip-mall rental kiosks to pay-per-view digital streaming services.

So for the paltry sum of $320 million, DISH gets to enhance its own brand and services with whatever pieces of the Blockbuster puzzle it wants to keep around. The company could arguably challenge Netflix (Nasdaq: NFLX) in the digital rental space or Coinstar's (Nasdaq: CSTR) RedBox service in high-convenience physical rentals. And those Blockbuster stores suddenly became prime outlets for selling DISH subscriptions. That's the way DISH would like to spin the situation, of course.

That's nice. Wait here while I train the pink unicorns to do a conga line, just to shake out some gold coins from their lustrous rainbow manes.

Reality Bites
In reality, DISH isn't getting much for its money. The Blockbuster brand may be well-known, but "much-loved" would be a stretch. Are you any more likely to buy a DISH product if it came with a Blockbuster sticker on it? No, I didn't think so.

Those 1,700 stores are what remains after culling the massive global network of 5,600 stores Blockbuster had when filing for bankruptcy last summer and should represent the most profitable of the bunch. But that ain't saying much for a rental chain that has been the butt of biting jokes for half a decade. I'd be shocked if the Blockbuster stores add anything to DISH's bottom line as they look like a huge cost center.

And let's just say that Blockbuster's diversified strategy has been underwhelming so far. Out of the plethora of services offered up to the public, the most successful one seems to be the kiosk partnership with NCR (NYSE: NCR) -- in which NCR has cut deals that contradict Blockbuster's brand message to its customers and doesn't look terribly interested in what its partner has to say.

Naked Gun 33 1/3: The Final Insult
Last but certainly not least, DISH just bought a lot of bad karma with Blockbuster's content suppliers. The bankruptcy deal left many contracts with Hollywood studios underpaid, and 111 parties filed objections to the DISH sale before judge Burton Lifland overruled them all. News Corp. (NYSE: NWS) studio 20th Century Fox says Blockbuster owes it $20 million; Blockbuster says there's no debt to settle there. The goodwill isn't exactly flowing Blockbuster's way, folks. How do you expect an operation with this background to sign attractive content deals, if that's what DISH wanted to achieve?

All told, I think DISH might have been better off piling $320 million in crisp Franklins at the midfield of Cowboys Stadium, dousing it with gasoline, and dancing around the flames. That way, at least the cash-burning party would be over by the time the fire brigade arrives.

Want to see how DISH stewards the Blockbuster brand to new heights -- or to further flops? Add DISH to your watchlist by clicking here.