One person’s trash is another’s treasure. Satellite cable company Dish Network (NASDAQ:DISH) just agreed to pay $320 million for struggling movie rental company Blockbuster (PINK:BLOAQ) at a bankruptcy auction. Let’s see what Dish has in mind now that overrated “activist” investor Carl Icahn gets thrown out of the way. (See “World’s Worst Stock Picker? Here’s Carl Icahn’s 7 Worst Investments“)
This is a huge risk for Dish because owning physical retail outlets is far outside the scope of competency of a satellite TV provider. That means the price paid for Blockbuster is only the tip of the iceberg when it comes to the cash Dish will have to spray at the movie rental chain. Mergers and acquisitions like this tend to be extremely challenging and rarely succeed as promised. That’s great news for Directv (NASDAQ:DTV), Echostar Corporation (NASDAQ:SATS), Time Warner Cable (NYSE:TWC), Comcast (NASDAQ:CMCSA), and Cablevision (NYSE:CVC).
The real asset for Dish (NASDAQ:DISH) is Blockbuster’s customer base and contact information lists. IMHO, they should’ve bought that information or paid to do a direct and/or in-store marketing campaign. That way the risk would’ve been contained to the amount paid for the marketing (which is a tax write-off).
Unfortunately, Dish was probably convinced by someone in their business development group that Blockbuster’s “brand” was the crown jewel to grab on the cheap. We strongly disagree. Blockbuster’s brand has been eclipsed by Netflix (NASDAQ:NFLX) AND stands more for “has-been” and “inferior movie rental experience”. Dish would be better off growing a shiny new brand in the movie rental space or, gasp, buying all or part of Netflix.
Time will tell how this all plays out. Until then, back to streaming another movie on Netflix (NASDAQ:NFLX).
Do you want to stay far away from Carl Icahn’s anti-Midas touch? Here are More Stocks Subject to Carl Icahn’s Hedge Fund Disaster.