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Bankrupt Blockbuster Bought By DISH Network — Look Out, Netflix?

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Satellite TV operator DISH network has outbid several other suitors for the assets of video-rental chain Blockbuster, which were auctioned off in bankruptcy court yesterday.

DISH paid about $321 million for the company, which has about 1,700 store locations.

What will DISH do with Blockbuster?

DISH CEO Charlie Ergen hasn't laid out any specific plans yet, but he will presumably use the chain in at least a few ways.

First, the Blockbuster stores can serve as local sales and service outlets for the DISH service. Second, DISH subscribers might be able to rent Blockbuster's DVDs or stream movies online, allowing DISH to compete directly with Netflix--one of the companies that helped put Blockbuster out of business.

And so what does the deal mean for Netflix?

In the short-term, probably very little. Netflix won its war with Blockbuster a few years ago, and it has since amassed a stunning 20 million subscribers to its US DVD and streaming service. As Netflix CEO Reed Hastings recently spelled out in this interview with me, Netflix is laser-focused on offering its $8-a-month streaming service, rather than competing in pay-per-view or movie sales the way many of its online competitors are doing. This simple value proposition has resonated with customers, and Netflix's subscriber base has boomed in the past two years.

In the longer term, the DISH-Blockbuster combination will add yet another big competitor to a crowded and noisy market, in which satellite companies, cable companies, Apple, Amazon, Facebook, Netflix, Hulu, networks, and studios are all fighting for control of premium video distribution of the future.

Right now, Netflix is by far the most successful of the new entrants, but the industry is changing fast. And the DISH-Blockbuster combination may create another player that everyone needs to pay attention to.

See Also: EXCLUSIVE INTERVIEW WITH REED HASTINGS: Netflix's Market Opportunity Is Bigger Than You Think