The Worst Blockbuster Ever

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It should come as no surprise (unless you live in a hole) that DISH Network (NASDAQ: DISH  ) recently announced the imminent closure of 300 Blockbuster video-rental stores. That number represents 35% of the entire store count. Buying Blockbuster, regardless of how low the price, was like buying a portfolio of pay phones.

Yet DISH Network's management isn't admitting failure with the video-rental chain, but instead characterizes this as the latest "effort" to return the venture to profitability. My advice to the executives: Deal with the short-term dip in share price and restore our faith in your basic intelligence by recognizing that a video-rental store is absolutely, completely, unapologetically obsolete in this era.

I'm sorry, but it's ridiculous to even have this conversation, in my opinion. One could make a case that little things like Netflix, Hulu, YouTube, Slingbox, Roku, Apple TV, every cable-on-demand service, every satellite-on-demand service, and plain old piracy warrant the immediate closure of every video-rental store in existence. But even if those completely disruptive services aren't convincing enough, there are also these little red boxes everywhere that require a tiny fraction of the real estate and zero employees that completely replace the traditional bloated video store. While hundreds of stores still remain, this 300-store closure follows the closure of 500 stores last year. So at least management is in the right ballpark.

But DISH Network believes Blockbuster still plays a role in strengthening the video-on demand services for its 14 million subscribers.

This is nonsense.

Everyone makes mistakes, and no one blames DISH for spending $320 million in 2011 for Blockbuster. If the company had closed all of the stores, made some money on the real estate, and leveraged some of the rights to the media, it may have even been a good investment. That didn't really happen. It was a lousy acquisition. Can't we jettison this '90s relic into the depths of the ocean, write it down, and focus on things that make money for DISH?

Since DISH's acquisition, we've heard about the idea of selling wireless carrier services in the Blockbuster locations. I can see the connection with DISH's proposed wireless network that is desperately trying to get off the ground after spending $4 billion and counting -- we can go and sign up for the new DISH wireless service at Blockbuster. In the best circumstance, assuming DISH can find a partner and launch its service, those stores will have some sort of use a couple of years down the line. In the meantime, will these spaces continue to serve solely as graffiti targets and temporary homes for cats?

This idea of using Blockbusters as wireless stores doesn't make sense to me. First of all, no one is going to Blockbuster to buy what Blockbuster is already known to sell -- movies. So this would require a complete rebranding that starts with the idea of telling the world Blockbuster is (A.) still a thing, and (B.) remotely deserving of consumers' time. I hope Don Draper is on retainer for this effort, because it's going to take one heck of a marketing job.

Stick to your guns
At a time when the company is putting everything on the line for this new wireless network that's costing many billions of dollars, isn't the leaky faucet that is Blockbuster one that should be shut off? Why let another dollar go to this dinosaur? No one will miss it, guys. Seriously, I can't think of a single person who's been to a Blockbuster in the past five years. Maybe DISH management should just combine Blockbusters with RadioShacks and put them inside a Sears with an entrance guarded by silverback gorillas to ensure that no human being will step foot inside, ever.

DISH needs to reroute its Blockbuster effort to, say, competing with DirecTV's amazing run in Latin America, or even its premium and still-growing U.S. market -- you know, its core, cash-generating business.

As for you, investor, I assume you are holding out for a wireless victory to drive the future growth of DISH Network. But please, please don't think that Blockbuster is a deep turnaround play that will yield magical gains in share price. It died years ago, and no matter how many Tyler Perry movies are thrown at it, it won't come back. Let it go.

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  • Report this Comment On January 27, 2013, at 9:11 AM, ecajoe wrote:

    Finally someone who makes sense. I have been saying this for a year now. The idea of hanging on to these stores is insane. Dish is using them to get Dish Network sign ups. They have a Dish sales person who works the peak hours to attack every customer who comes in the door. They have a quota for each Dish Specialist to make each week. The problem is the stores are shedding more profits that even Dish sales can justify. Money spent elsewhere would probably get them more subscribers. It's time to cut their losses and move forward. Everything about Blockbuster is from the 80s (even their computer systems). Their locations don't make sense, their store footprint does not make sense and, as you put it, their marketing makes no sense at all. Dish needs to start with these 300 and keep going. I feel sorry for those who will no longer have a job but its just a matter of time with this misstep.

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