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The bidding war for Blockbuster went on well into the night. DISH Network's (Nasdaq: DISH ) Charles Ergen was the last bidder standing, winning the fading DVD rental chain for $320 million.
The synergies are fairly obvious. DISH can aggressively market its satellite television service to the aspiring couch potatoes who frequent Blockbuster stores for a quick fix of temporary celluloid. DISH can also cash in on Blockbuster's brand, giving it more entertainment clout than leading satellite television rival DIRECTV (NYSE: DTV ) .
Through Blockbuster, DISH will be able to reach beyond its 14.1 million existing subscribers.
Obviously, this doesn't change the real problem at Blockbuster. Folks just aren't renting DVDs the way they used to. Will DISH make a material investment in improving the roughly 1,700 stores still standing? Is it good for the money? This is the same DISH that is likely in a nine-figure hole for trampling over TiVo's (Nasdaq: TIVO ) DVR patents.
I'm not just talking about the $228 million that DISH will have to shell out for Blockbuster after adjustments for available cash and inventory. The chain isn't exactly in "move in" condition. It's a fixer-upper, and that won't come cheap.
Blockbuster stores are unlikely to survive for too much longer if they stick to the current formula. Physical distribution of movies and video games is a dying business. It's true that GameStop (NYSE: GME ) is running a profitable small-box business, but even that chain's long-term viability is in doubt.
Blockbuster will have to become more of an entertainment retailer if it wants to keep its stores afloat, and that will mean more than renting out Saw X and pitching satellite television subscriptions in a few years.
Good luck, Ergen. You're going to need it.
How would you save Blockbuster if you had the top bid? Share your thoughts in the comment box below.