Say good night to the Blockbuster night. The video chain that a decade ago made moguls tremble with its stranglehold on video rentals will be gone in January: Dish Network, which paid $234M to take Blockbuster out of bankruptcy in early 2011, said today that it will close the 300 remaining U.S. retail stores as well as its distribution centers. Blockbuster’s DVD-by-mail service also will end, though franchisees and licensed Blockbusters stateside and overseas will be unaffected. “This is not an easy decision, yet consumer demand is clearly moving to digital distribution of video entertainment,” Dish CEO Joseph Clayton says. Dish will keep the Blockbuster brand and video library. It also will continue the Blockbuster @Home service it offers to Dish customers, as well as the Blockbuster On Demand transactional streaming service.
After beginning in Dallas in 1985, Blockbuster steadily expanded — eventually usurping ma-and-pa video rental stores as well as rival chains including Hollywood Video. In 1994 Viacom paid $8.4B for the chain, using its cash flow to help outbid Barry Diller in a battle for Paramount. By 2004 there were 9,000 Blockbuster stores, but the business was beginning to deteriorate as Netflix ramped up its DVD-by-mail service. Viacom spun off the chain, and took a $1.3B charge. Billionaire Carl Icahn waged a proxy fight to join its board, vowing to help revive the business and cut costs. But Blockbuster was hamstrung by its investment in brick-and-mortar stores. It was late to launch a DVD-by-mail service, to take on Redbox’s rental kiosks, and to challenge Netflix’s streaming service. Dish bought Blockbuster hoping to use its stores to also market a wireless service it planned to launch. When that was delayed, Blockbuster was just an albatross: In the first half of this year, it lost $4.4M on revenues of $300.1M, which was -48.8% over the previous year.
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