Blockbuster's Ready to DISH Out Some Payback

Revenge is a dish best served cold, the saying goes. So it must have been savory, indeed, for Blockbuster to watch Netflix (Nasdaq: NFLX  ) -- the company whose paradigm-shifting DVD mail order business help put it into bankruptcy -- go through its recent self-inflicted injuries.

And to sweeten its Schadenfreude, DISH Network (Nasdaq: DISH  ) , the company that acquired Blockbuster out of bankruptcy earlier this year, is thinking about having Blockbuster fly the flag for its proposed live cable-channel streaming service, becoming -- it would hope -- the brand with the clout that Netflix once had.

Going this route gives DISH greater flexibility in packaging channels for its subscribers, offering them more flexibility. Right now, cable TV bundles channels together in a way that forces its customers to pay for many they don't want just to get the ones they do. Broadband-only live video streaming could let DISH offer channels on an a la carte basis. This would put pressure on cable channels to do the same or risk losing even more customers than they have already.

Ground control to LTE
DISH has also proposed its own mobile broadband wireless network. This one would use 4G LTE technology delivered by a satellite/terrestrial combination similar to the network that LightSquared has proposed. Both of these networks will need FCC approval, which may not come so readily.

LightSquared's LTE network has already come under fire from the GPS industry, which claims that LightSquared's signals would interfere with GPS systems.

DISH's proposed LTE network, on the other hand, has received support from the U.S. GPS Industry Council. But DISH had planned on using spectrum and other resources it would get from its proposed acquisition of two other bankrupt companies: satellite operators TerreStar and DBDS. These deals haven't completed yet, and it wasn't until recently that DISH settled with Sprint Nextel (NYSE: S  ) over TerreStar's and DBDS's unpaid bandwidth fees.

Kansas cities, here I come
DISH is not the only company seeking live streaming broadband-only rights or working to create a proper streaming delivery system.

Google (Nasdaq: GOOG  ) has been building an experimental 1Gbps fiber-to-the-home -- similar to Verizon's (NYSE: VZ  ) FiOS but much faster – in Kansas City, Mo., and next-door Kansas City, Kan. That network will be ready for at least partial operation in early 2012. The Wall Street Journal reported that Google will use that high-speed network as a laboratory for its own live video-streaming venture.

Apple (Nasdaq: AAPL  ) , of course, has the device right at hand -- literally -- to take advantage of a full cable operator's content by streaming, at least on an individual basis: the iPad. For the full living room/theater experience, I guess we'll have to wait for a real Apple-worthy TV to finally show up.

If you can't fight 'em, join 'em
The cable-company industry is gazing into its crystal ball and seeing its own predictable, if not irreversible, fate. Operators are watching their TV customers slip-sliding away to streaming-video-land. Comcast (Nasdaq: CMCSA  ) and Time Warner Cable, for example, lost 238,000, and 128,000 customers, respectively, in the second quarter. But they have also been watching their broadband subscriber numbers rise. Comcast gained 261,000 broadband customers in the third quarter while losing 165,000 from the video ranks.

Cable companies don't have to ask the Magic 8-Ball what to do; they are already doing it -- steadily turning themselves into pure Internet service providers. Cable operator Charter Communications CEO Mike Lovett put it this way during the earnings conference call last week: "[There's a] bit of a mantra within the company to think of ourselves as an ISP."

DISH is being aggressive in its attempts to change from a satellite-video content-delivery company to a streaming-video company. DISH, too, has been seeing its customers disappear, losing 111,000 in the third quarter, the fifth quarterly loss in the past six.

The company knows it won't be too much longer before cable customers will finally rise up and ask themselves why they are paying for two services coming through the same pipe while one of those services can deliver everything they need. DISH's strategy to be at least one of the main mobile streaming-delivery pipelines may work out if that satellite/terrestrial 4G LTE network can ever get off the ground.

As DISH Chairman Charlie Ergen said during the earnings conference call on Monday, "[W]e believe that the wireless business is a place where -- if we're in the video business, we need to be more than fixed; we need to be a mobile video as well. The wireless spectrum that we're attempting to acquire allows us to be able to do that."

If or when that happens, it'll be a show in itself to watch Netflix and Blockbuster again start slugging it out toe-to-toe.

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Fool contributor Dan Radovsky has no financial interest in the above-mentioned companies. The Motley Fool owns shares of Apple and Google. Motley Fool newsletter services have recommended buying shares of Google, Apple, and Netflix and creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On November 09, 2011, at 12:10 PM, akakroke wrote:

    This is hands-down the best article I've read since becoming a Fool in July, 2011. So many variables taken into account and DISHed out in a most palatable salad leaving only the need to digest....

    akakroke

  • Report this Comment On November 09, 2011, at 8:40 PM, XMFDRadovsky wrote:

    akakroke,

    Wow, thank you! What a nice thing to say.

    Dan

  • Report this Comment On November 14, 2011, at 7:44 PM, akakroke wrote:

    Dan,

    It's only the truth. This, from your Fool bio:

    " Dan focuses on making complex legal and financial concepts easier to understand."

    But I see you are not a full time Fooler; I was hoping to find you associated with one of the newsletters, eg. Inside Value or Income Investor, and would have joined it. C'est la vie....

    Akakroke

  • Report this Comment On November 14, 2011, at 7:51 PM, akakroke wrote:

    This said "Motley Fool editor Dan Dzombak" which led me to believe you were the lead on one of the services?

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