Dish Network has the answer to Netflix: Blockbuster. The company bought the bankrupt Blockbuster six months ago at auction for $228 million and apparently wasted no time integrating Blockbuster’s current streaming service into Dish’s satellite TV plans. The Blockbuster Movie Pass is a complete media rental service and features streaming movies and TV shows along with movies and games-by-mail. But don’t cancel your Netflix streaming account just yet.

This isn’t Blockbuster or Dish Network’s first foray with streaming video. The then-alive (but quickly sinking) Blockbuster launched On Demand back in 2008 complete with its on dedicated player. It’s still up and running and features a robust platform support second only to Netflix. Likewise, Dish Network has long offered on demand video content and was the first to offer 1080p videos.

In fact the Blockbuster Movie Pass is a relaunch of existing Blockbuster products combined with on demand content from Dish Network. The Blockbuster streaming content adds Starz, Epix, Sony Movie Channel, and Encore to Dish’s on demand library that includes Fox, TBS, TNT, Discovery, AMC, CN, DIY, HGTV, FOOD and History. The combined content can be streamed only from DishNetwork.com. Blockbuster.com will continue to stream its On Demand service.

The streaming content can’t compete with Netflix just yet though. Blockbuster announced today that the streaming to TV library includes just 3,000 movies — 4,000 are available if watched via a computer. Of course the DVD mailing service better competes with Qwikster (Netflix) and features 100,000 available titles, which can be returned at Blockbuster location. However, unlike the current Blockbuster By Mail service, you can’t walk out with another title; your next movie will be mailed to you.

Today’s announcement leverages Blockbuster’s name in movie rentals. You don’t rent movies from Dish Network, you rent movies from Blockbuster. That’s at least what Dish Network hope consumers think.

The service launches next Saturday, October 1 and goes head-to-head with Netflix for $10. However, this isn’t for cord cutters. This service requires a Dish Network satellite TV package and is not available separately. New subscribers can opt for one year of Dish’s Top 200 programming package for $39.99 a month. The Blockbuster service will be billed with the Dish Network TV service, resulting in one bill for subscribers.

Blockbuster’s Ira Bahr said , “They [consumers] still need their SpongeBob Squarepants, they still need their Fox News.” However, some people don’t want Fox News or SpongeBob, but for those already subscribed to Dish, this seems like a no-brainer for $10 a month.

via USAToday

I’d be lying if I said that I haven’t taken some delight in watching the complete and utter collapse of Blockbuster.

You see, back when I was a child, our community had a couple of thriving local video stores that were the source of pretty much endless enjoyment for me. Then Blockbuster came along. By then, the company was already a mega-chain of blue and gold awnings that decorated much of the country. They had inventory that simply could not be matched. Unsurprisingly, they crushed the local video stores.

This happened all over the country for years. Goliath didn’t just beat David, he obliterated him simply by showing up — and then danced on his grave while entertaining his children.

You’d think the sheer momentum of such a behemoth would make them unbeatable. And yet, here we are. Earlier today came word that Dish Network was buying Blockbuster’s assets out of bankruptcy court for around $230 million — in cash. This is the same company that Viacom once paid $8.4 billion for (and later spun them off in their own multi-billion dollar IPO). The fall from grace is almost unbelievable.

But it’s actually not if you’ve been following Blockbuster over the past several years. And their tale could end up being a great cautionary one for today’s current crop of giants. And more importantly, it might serve as a point of inspiration for startups going up against a seemingly unbeatable giant.

Microsoft, Google, Apple, etc. All of these guys may seem unbeatable. If they’re investing resources into a space, you might as well not even try, right? But that’s exactly what Reed Hastings did in 1998 when he started Netflix. He was simply a disgruntled Blockbuster customers who was sick of the ridiculous late fees and thought he could do better with a new approach to movie rentals.

Blockbuster undoubtedly laughed at Netflix at the time. In fact, two years later, Blockbuster could have bought Netflix for just $50 million — quite literally pocket change for a company that had held a $5 billion IPO the year prior. Blockbuster refused all such offers, as Fast Company’s excellent rundown of the best Blockbuster gaffes reminds us.

Instead, Blockbuster put a huge investment into Enron (their broadband services subsidiary). You can’t make this stuff up.

It wasn’t until 2004 — six years after Netflix launched — that Blockbuster realized it needed to enter the online DVD rental-by-mail space. By then, Netflix was already turning a profit and Redbox had just launched. Blockbuster was already dead — they just didn’t realize it yet.

It’s such a great example of a company resting on its laurels and getting blindsided. But it’s hardly even fair to call it a “blindsiding”. Blockbuster probably could have done dozens of things to counter the rise of Netflix in that initial six year space. They were either simply too arrogant, too slow, too stupid, or all of the above to make a move.

That’s why it’s impressive that Google is making such big changes to the company right now, when they’re arguably at the peak of their power. Their not resting on their laurels. Hundreds of challengers are gunning for them in a number of areas, and the co-founders apparently saw the company slipping a bit — as did some of the rest of us — and decided to proactively make some bold moves, all of which we haven’t likely seen yet.

That’s pretty much the opposite of Blockbuster towards the end of their run. You had a CEO defiantly declaring that Netflix was no real threat. The best quote: ”I’ve been frankly confused by this fascination that everybody has with Netflix …Netflix doesn’t really have or do anything that we can’t or don’t already do ourselves.”

This was a guy, Jim Keyes, who had just attempted to take over Circuit City, thinking that would solve Blockbuster’s problems — more retail stores. A few months later, Circuit City went belly up. The fact that Blockbuster didn’t end up buying them probably saved them from the same fate for the remaining two years of life.

Later, Blockbuster’s head of digital strategy had another money quote in a sit-down with Fast Company. “We’re strategically better positioned than almost anybody out there. Never in my wildest dreams would I have aimed this high,” he said indicating that they could still beat Netflix.

The famed former Iraqi Information Minister couldn’t say this stuff with a straight face.

So if you’re out there working on a startup in a space owned by a giant, just remember that nothing lasts forever. Even the biggest companies eventually grow complacent and get taken down. There are angles and new ideas all over the place that they simply cannot (or will not) see around their egos and wads of cash.

They will snooze and they will lose. Every night used to be a great night to make it a Blockbuster night.

[top photo: flickr/trebomb]

DISH Network this morning announced that it was selected as the winning bidder in the bankruptcy court auction for substantially all of the assets of Blockbuster, which went belly up in September 2010.

DISH’s winning bid was valued at approximately $320 million, but after adjustments for available cash and inventory and others, the company expects to end up paying approximately $228 million in cash to acquire Blockbuster.

Yesterday, DISH Network’s bid was worth $307.1 million (or $308.1 million, depending the source).

Other bidders included billionaire Carl Icahn, a major Blockbuster shareholder and bondholder, and a consortium of existing Blockbuster lenders led by Monarch Alternative Capital. South Korea’s SK Telecom was also a bidder but dropped out earlier.

A sale-approval hearing is scheduled for Thursday.

DISH says the transaction is expected to close in the second quarter of 2011, although its completion is contingent upon satisfaction of certain conditions, including bankruptcy court approval.

Here’s how Tom Cullen, EVP of Sales, Marketing and Programming for DISH Network, pitches the deal:

“With its more than 1,700 store locations, a highly recognizable brand and multiple methods of delivery, Blockbuster will complement our existing video offerings while presenting cross-marketing and service extension opportunities for DISH Network.

While Blockbuster’s business faces significant challenges, we look forward to working with its employees to re-establish Blockbuster’s brand as a leader in video entertainment.”

Established in 1998, DISH currently serves more than 14.1 million satellite TV customers.

What will you get for your $290 million?

“The purchaser will be able to take full advantage of Blockbuster’s many strengths, which include an internationally recognized brand name, an exceptional library of more than 125,000 titles, millions of loyal customers, and a multi-channel content distribution platform. Because of its ability to deliver physical content (through DVDs) and digital content (through streaming), Blockbuster can offer customers the unique ability to access any movie, any time.”

The company is currently in Chapter 11 bankruptcy.

Press Page via Digitaltrends

It’s come to this: the success of Netflix and Redbox in the United States have driven Blockbuster, as expected, to file for bankruptcy protection after failing to adequately and swiftly adapt its movie-rental model from physical storefronts to mail-order and online technology pioneered by its aforementioned competitors.

The company filed a voluntary Chapter 11 petition today in U.S. Bankruptcy Court in New York, listing assets of $1.02 billion and debt of $1.46 billion. The company’s largest trade creditor is Twentieth Century Fox Home Entertainment with a $21.6 million claim, according to today’s filing.

The news, first reported by Bloomberg, comes almost 25 years after Blockbuster opened its first store (Dallas, Texas on October 26, 1985).

Blockbuster’s non-U.S. operations and its domestic and international franchisees, all of which are legally separate entities, were not included in the filings and are not parties to the Chapter 11 proceedings.

Blockbuster in a statement says it has reached an agreement with a group of bondholders, led by billionaire Carl Icahn, holding approximately 80.1 percent principal amount of its 11 3/4 percent senior secured notes on the terms of a plan to recapitalize its balance sheet and put it in a stronger financial position.

Blockbuster claims said plan would reduce its indebtedness significantly, from nearly $1 billion at present day to an estimated $100 million or less when implemented.

The company has secured a commitment of $125 million in new “debtor-in-possession” financing from the senior noteholders to help meet its obligations to customers, suppliers and employees in the ordinary course during the recapitalization process.

Blockbuster says all its U.S. operations, including its stores, DVD vending kiosks, by-mail and digital businesses, are open and serving customers in the normal course and that the company is fulfilling all orders as usual, including continuing to provide access to new releases the first day they become available.

For the time being, all 3,000 of the company’s stores in the United States will remain open. If I were you, I wouldn’t be too sure about your neighborhood video store sticking around for that much longer, however.

The company’s international operations in Canada, Denmark, Italy, Mexico, and the United Kingdom are also conducting business as usual – the only country where the axe is falling is Argentina, which Blockbuster says has experienced continued shortfalls in operating cash flow.

Blockbuster is about to file for Chapter 11 bankruptcy and will close up to 800 stores. According to the WSJ, the move would wipe out Blockbuster’s debt and leave the company ready to take on the online market.

My question is this: Who still goes to Blockbuster? Anecdotally, I know our 80+ year old neighbors do – they enjoy a film now and again – but the physical stores are a millstone around BB’s neck. While I don’t wish any company ill, I feel like they missed the boat in electronic video streaming and are now idling on the shore watching everyone else enjoy the cruise. Hell of a metaphor there, really.

Place your bets: How many believe Blockbuster will be sold by 2011?

via Barrons

They will probably only close about 500 underperforming stores and attempt to shore up their business with online streaming and rentals. However, it is patently obvious that the process of rending physical media only works in areas with little or no network connectivity which means they may soon be serving the dubiously lucrative Rural Post Road market.

Should they hang in there? Should they go? Thoughts?
via Giz

[via Zatz Not Funny]

Additionally, Blockbuster will get favorable payments terms from the studios in return for a lien on some assets involving Blockbuster Canada. So basically Blockbuster is giving them Blockbuster Canada until it pays back some loan or reverts to the normal payment terms

The struggling-Blockbuster also says that it has implemented a plan to cut operating costs by $200 million this year to preserve cash and further improve liquidity. Blockbuster is also in discussions with advisors for its bondholders related to debt recapitalization.

The Warner-Blockbuster deal was controversial because the studio had recently negotiated deals with Blockbuster rivals Netflix and Redbox to give them such access only after the movies have been available to purchase on DVD for 28 days. Warner basically screwed Netflix and Redbox.

If what happened with Warner is any indication of things to come, Netflix might end up with the short end of the stick again if Sony And Fox withold their movies from Netflix for 28 days as well.

When’s the last time you were at a Blockbuster?

For me, it’s been a few years. And it’s been several years since I was going regularly. And I was only doing that because the then-Viacom-backed-giant drove the mom and pop video stores out of business in my community. I have no desire to ever step into a Blockbuster store ever again. But Warner Bros. sure wants me to.

Today, Blockbuster announced it has reached a deal with Warner Bros. to ensure the studio’s new titles would be available in Blockbuster stores and by mail the day they are released on DVD. This is significant because Warner recently negotiated deals with Blockbuster rivals Netflix and Redbox to give them such access only after the movies have been available to purchase on DVD for 28 days. In other words, Warner just screwed Netflix and Redbox.

So why would Warner do such a thing? Well, in their release, they make it sound as if the two sides have long been friends (BFFs for over 25 years!) and they want to continue that relationship. But the reality is more complex.

Obviously, this all boils down to money. The financial terms of the deal aren’t stated, so it’s hard to know if Blockbuster is actually paying more than Netflix would have (more on that below). But regardless of that, it seems to me that the line of thinking by Warner may simply be to pretend it’s the early-to-mid 2000s and the DVD business is booming.

Back then, Blockbuster dominated rentals and more importantly for Warner, DVD sales were on fire. In fact, in quite a few cases, studios were making quite a bit more off of DVD sales than off the box office take for a film. DVDs became the golden calf of the industry.

But over the past few years, that calf has been slaughtered. Warner clearly believes it’s because of services like Netflix and Redbox make renting movies too easy, and thus, decrease the need to buy DVDs. That’s true, but Warner’s response is faulty logic at best, and idiotic at worst.

The truth is that the vast majority of movies have never been worth owning. People were only buying them in droves over the past decade because renting from Blockbuster (driving to the store, paying late fees, etc) was a pain in the ass. Once an easier and more convenient way to rent came along (Netflix), consumers awoke to the realization that there are very few movies actually worth owning. But even if it wasn’t Netflix that came along, some other method of distribution (such as the Internet) would have, and DVD sales still would have shrunk.

So now, Warner is cutting preferred deals like the Blockbuster one in an attempt to make renting movies more of a pain in the ass once again. Brilliant.

But still, why not give Blockbuster the same raw deal they gave to Netflix? I’d imagine part of it is because Blockbuster has all those retail stores that sell DVDs as well as rent them. The availability of new releases (which again, Netflix and Redbox won’t have) will get people into the stores, and in Warner’s logic, get them potentially buying DVDs from there.

And there’s another reason: Blockbuster itself is a wounded calf. The company recently warned that it may have to file for Chapter 11 bankruptcy as it’s drowning in debt (thanks in large part to the aforementioned stores). Warner likely got a sweet deal from Blockbuster in an effort to save the struggling company. And if, by some miracle, Blockbuster is saved, they’re likely to get that same sweet deal over and over again.

The problem with all of this is that it won’t work. People are not going to start buying DVDs like they were a decade ago, again. The window has closed. We’re moving to a time of distribution over the Internet, but rather than get out in front of that, Warner is inexplicably propping up dinosaurs like Blockbuster.

While there is validity that many consumers don’t care all that much about when a DVD is released, there are millions that do. For example, Sherlock Holmes was a very popular film this past year. When it comes out on DVD next week, neither Netflix or Redbox will have it available to rent — but Blockbuster will. Consumers will be confused as to why this is.

Short term, this may prop up Blockbuster a bit, and may even slightly boost DVD sales. But long term, money-grabbing shenanigans like this that screw consumers will only lead to one thing: piracy.

Because Apple did not agree to enter into a deal with Hollywood that restricts them from renting movies during this 28-day window, it was available not only to buy but also to rent this past Tuesday on iTunes, the same day it was released on DVD. While iTunes has its own series of somewhat convoluted rules with regard to rentals (for example, some movies are restricted from being rented when airing on premium cable channels like HBO), in this instance, they hands down beat Netflix at their own game: rentals. And thanks to this new 28-day window, which the other major studios will undoubtedly have interest in getting from Netflix as well, this is something we could see a lot more of: iTunes, Amazon, Xbox Live, and yes, even Blockbuster Online being the go-to sources to rent new releases.

And that’s great news for those services which haven’t yet seen the rush of popularity that Netflix has enjoyed over the past several years. But Apple COO Tim Cook noted in an earnings call last year that iTunes movie rentals were a surprisingly strong part of the store and were helping drive Apple TV sales. People seem to like the idea of renting movies over iTunes, they just needed an incentive to do it more. This is it.

Sure, for a lot of people, a 28 day wait after waiting months for a movie to be released isn’t the end of the world. But a solid 30% of Netflix’s business is still people who rabidly want new releases when they come out. With Netflix no longer offering that option, they will turn elsewhere — and I don’t mean buying these movies. If they’re opposed to piracy (which will go up as a result of this window if all the studios get on board), they’ll turn to one of Netflix’s rivals in rentals. And with these companies’ living room hardware getting upgrades this year (Xbox in talks to get ESPN content, Apple TV likely to see a major upgrade, etc), there could be very enticing options. Not to mention a certain new Apple device likely getting unveiled next week that will probably support movie rental playback as well.

I understand why Netflix felt the need to cut this deal: on one hand, Hollywood was strong-arming them in a futile attempt stop their own DVD sales bleed. On the other, they want to secure what they believe is their future: streaming. But they’ve given their rivals a real opportunity with this 28-day window. Hopefully, one of them will take advantage of it.

[photo: flickr/snowkei]

This is one of those patents that some people find to be, well, kind of ridiculous. Luckily, the judge agreed, and dismissed the case against Blockbuster and Netflix. The patent covered a method for letting users know that their status queue has been updated. Blockbuster and Netflix both provide this information, however their method of notification doesn’t infringe on the patent. This is kind of a bummer for Gamefly, since they settled out of court with the same patent holder a while back.

[via Techdirt and Slashdot]

Use coupon code GW91TB1 during the checkout process to score the deal. Use this online search tool to find a kiosk near you. Better hurry though, the deal ends on December 8, 2009. [via Dealnews]

It seems the bulk of the kiosks will be at Duane Reade drugstores, but other locations like Gristedes grocery stores will have them as well.

Is this Blockbuster’s last gasp at staying relevant? Who knows, but at least it shows that the company is willing to evolve and forgo the traditional brick and mortar video rental business model. Thankfully this plan is a little more grounded than Blockbusters last two ventures: Blockbuster OnDemand & SD card movie rentals.

SD cards are everywhere, indeed, but there are precious few DVD players, TVs, and personal media players that support them. Your computer has an SD card reader, or else you’ve bought one by now, but I don’t think people want to rent things to play them on their computers if they can stream them so incredibly easily. Sure, working out how to get an SD card’s content onto your TV may be easy for tech-oriented people like you and me, but for the people grabbing a movie on the way out of the grocery store… not so much.

With luck, Blockbuster will wise up and allow a USB drive to be plugged in. I mean, why didn’t they do that first thing? Everybody has those sitting around. And not that many people have high-capacity SD cards. If the movies are over 2GB, a lot of people are sunk because they only have the card that came with their camera (likely 512MB or thereabouts). Oh well, it’s a step in the right direction. Although I guarantee you’ll see a Blockbuster DRM-stripping app out there within a few weeks of these hitting the street.

At the time, it was reported that Blockbuster, the former video giant that is aging anything but gracefully, was also backing this 30-day window idea (where it might see a 30-day rental exclusive on some titles). With the company bleeding money, it shouldn’t be surprising that they’re aligning themselves with the studios. But more recently, there has been some very disheartening news: Netflix seems to be willing to back this idea too. Yes, the poster child for much of what is right about the consumer movie business these days may be on the verge of making a deal with the devil.

Let’s be clear about what this means: If you’re a Netflix subscriber, you will no longer be able to rent new movies until 30 days after they’ve been released on DVD.

The show business trade publication Video Business reported last week that Netflix would be willing to accept this 30-day model for huge discounts on the movies after that period — perhaps as much as 50%. As a business decision, this would seem to make sense since 70% of Netflix’s main business is catalog (older) release rentals. As a long-term strategy, this is just about the dumbest thing I’ve ever heard.

Here’s what this will do: It may drive sales of DVDs a bit short term. But soon, online movie piracy will pick up to new heights. If the movie studios have nightmares about piracy now, their reality will be truly terrifying with this plan in place.

There are two major factors that stop movie piracy from being as bad as music piracy was a few years ago: Broadband speeds and convenience. Let’s speak to the latter one first: With services like Netflix, Redbox, iTunes, and the like all offering fairly easy ways to get movies you want, when you want them, it’s less of a headache for most people to use them rather than digging around online to get them for free.

But with this new 30-day window in place, the masses would be driven online to search for more illegal content — and more importantly, it would begin to fuel a piracy ecosystem for Hollywood content. There would be more people downloading, but also more people sharing. That’s the key.

Broadband remains an issue in many parts of the country, but increasingly, it’s not as big of one as the studios might believe. With devices like the Xbox 360, Apple TV, PS3, and services like Hulu and YouTube, people are getting used to downloading or streaming content over their connections. If you take away the convenience of something like Netflix, these same people will eventually put two and two together that these connections can also be used to get new content online for free, illegally.

Hollywood is making a fatal error with this strategy. In their greed-clouded view, they seem to really believe that most people are renting movies rather than buying them because they’re given an option. Kill the option, kill the problem, right?

The truth is that most people are renting movies rather than buying them because the majority of movies released are crap that no one wants to buy. There’s a huge difference between paying $3 (or less, with Netflix) to rent a movie that may be entertaining to watch once (or might not be), than having to spend $20 to buy something you don’t really want and will have forever.

Hollywood assumes that because they’ve sort of made this type of buy-first, rent-later environment work on services like iTunes and Xbox Live (where it doesn’t really work and is just hampering both services) that it will translate to Netflix as well. But if you give a mouse a cookie, then try to take away that cookie, he’s going to bite your hand off.

What’s really befuddling is that Netflix lacks the vision to see through this BS. They don’t seem to realize that longterm it’s going to screw them too. While new movies may not be as core to their business as they are to Redbox (which is suing many of the studios to stop something like this), new movies are the sexy lures that bring in new business. If I can’t get at those sexy lures for 30 days, they’re not nearly as sexy.

The Internet, meanwhile, offers plenty of those sexy lures. Sure, there’s some risk in grabbing them, but it’s really pretty minimal. Did I mention they’re free? Because Hollywood and now Netflix are practically screaming it.

[images: Miramax and New Line Cinemas]

TiVo users have known that Blockbuster On Demand was coming to TiVo for a while, but the service just went live. So, does it have the goods to put up a fight against Netflix or Amazon On Demand that have been streaming content on TiVos for months already? Nope, not at all.

My main issue with the Blockbuster On Demand on TiVo is that it doesn’t offer any titles in high definition. That’s a problem for a lot of folks including me. But besides that, there are only 652 titles available right now, which pales in comparison to Netflix’s 17,000 streaming library.

Sure, I know that Netflix is a subscription service that requires a monthly plan, but even the $4.99 per month plan will get you all you can watch streaming content. Compare that at the $2.99 or $3.99 rental price per title of Blockbuster and tell which is the better deal. There are a few free movies on Blockbuster right now, but they seem like D-run flicks.

At least the interface seems sufficient. It’s about the same thing as Amazon On Demand actually. It’s nothing fancy, but it gets the job done.

The Blockbuster On Demand set-top box was a great first step, but a lot of people do not want another box to clutter up their AV rack, but simply an app that works with devices they already own. Hopefully soon more content will be available as well as HD streaming. Digital delivery is the future and this service shows that at least Blockbuster has seen the light.

Don’t look now, but your Series 2, 3, or HD TiVo is probably getting the Blockbuster On Demand update right now. Actually, go look now because while I couldn’t get a picture to show this accurately, the screen above looks slightly different than other TiVo screens. It’s tad higher resolution and there is just something different about it. Maybe a TiVo GUI refresh is just around the corner…

Update: Blockbuster On Demand is now live. Hands-on coming soon.

The movie rental fees range from $2.99 for “classic” or old films to $3.99 for new releases. The library will be expanded over the coming weeks to include more content.

Don’t get me wrong, I’m all for digital delivery. It’s the future, but Netflix and Amazon already seem to have a wide selection of content with some available in HD. I doubt Blockbuster will be able to provide a better experience than those two and there isn’t even any mention of HD content in the press release, which kills any appeal at all to me. If it’s not HD, I’m not going to spend money on it.

Check back later for a hands-on with the new service. Hopefully that will be sometime today.

[AOL Money via Engadget]