Blockbuster lives! (But for how long?)

Blockbuster logoI blogged recently about the financial travails of Blockbuster and its pending sale … indeed, whether the brand would survive or be liquidated instead.

Wednesday evening’s auction was the scene of some drama as various groups contended with each other for the right to purchase this white elephant. As the evening wore on, Dish Network was vying with Monarch Alternative Capital for placing the high bid.

It was a true battle between old and new forces … with Dish Network seeing Blockbuster as a conduit for augmenting its suite of services, and Monarch looking only to liquidate Blockbuster’s substantial real estate holdings while shuttering the enterprise for good.

When the dust finally settled, Dish Network was the victor, agreeing to pay ~$228 million in cash at closing, which is expected to occur within the next few months. In total, the deal came in at ~$320 million, which tracks with the current value of Blockbuster’s assets.

What in tarnation is Dish Network thinking of doing with Blockbuster? It turns out that the company is hoping to use at least some of Blockbuster’s ~1,700 store outlets to facilitate cross-marketing of its satellite programming and related video services.

The industry is already abuzz with what this really means. Is the Blockbuster acquisition by Dish Network a master-stroke … or a big blunder?

Dish Network looks like it will attempt to keep Blockbuster afloat by having it provide free or discounted rentals as a value-add to Dish’s pay TV subscribers. But industry watchers are also looking at potential online opportunities which could turn out to be more lucrative, since Blockbuster holds streaming rights to various video titles that Dish can use to expand its existing streaming offerings. It could also roll Blockbuster licenses into a Dish-branded online video-on-demand service offering.

In a likely related move, Dish Network has also acquired the assets of financially troubled satellite operator DBSD North America. That purchase provided access to a broadband spectrum that Dish can now use to roll out wireless networks for voice or data communications. This way, it wouldn’t need to rely on the broadband networks of other Internet service providers to stream the content to its satellite TV customers.

But with the pace of change and the fickleness of customers, any effort to bring synergy to these new acquisitions must happen very quickly. Dish Network doesn’t have the luxury of time to make things work; it’s got to happen in weeks and months rather than years.

So the coming months will be interesting in seeing how the Dish/Blockbuster union pans out. One thing is certain: Blockbuster won’t end up looking anything like it does today. But on the bright side, the brand won’t be thrown into the dustbin of corporate history – at least not yet.

And that probably surprises more than a few industry observers – the ones who have been loudly predicting the death of this iconic brand for months or years now.

The Broad and the Beautiful

It took awhile, but access to faster Internet service is finally beginning to even out across all geographic regions of the United States.

A new study on broadband growth conducted by comScore, Inc., a digital marketing intelligence firm, finds big gains for broadband in rural areas. As of the end of 2nd Quarter 2009, an estimated 75% of rural households with Internet access now have broadband service. (Rural markets are defined as those having less than 10,000 population).

Two years ago, comScore counted only 59% of rural households connected to the Internet having broadband service.

Not surprisingly, large metropolitan areas with populations over 50,000 have higher broadband penetration (92% of Internet households), but this percentage is up only a couple points in the past year.

Who’s providing these broadband services? A just released study by Leichtman Research Group found that 19 service providers account for well over 90% of the U.S. market – the largest among them being Comcast and Time Warner for cable … and AT&T and Verizon for telephone.

Indeed, some metro markets are beginning to approach broadband saturation. For instance, in the New York metropolitan area comScore finds 96% of all Internet households are using broadband. It’s 92% in Chicagoland, and nearly 90% in Philadelphia and San Francisco-Oakland-San José.

The Internet broadband penetration for the country as a whole — at nearly 70 million households now — is estimated to be over 85%, meaning that rural areas are still relatively under-served. But the differential is shrinking quickly. Chalk up yet another instance where regional differences are disappearing – thus making rural markets more attractive not just to consumers, but also for rural-based businesses and for companies that rely on far-flung employees who telecommute from home.

It makes saving money on gasoline and avoiding rush-hour traffic snarls more attractive than ever!