Say Goodbye To Blockbuster Stores

The Blockbuster brand emerged from the ashes of bankruptcy to have an impact on the bottom line of its new owner, Dish Network (NSDQ: DISH). The satellite TV service provider reported its first subscriber uptick in about two years, growth that was driven, it said, by the addition in October of Blockbuster’s branded streaming service. But say goodbye to Blockbuster as we’ve known it — Dish also said it will close a third of the once formidable chain’s 1,500 brick-and-mortar outlets while hinting that more shutterings are on the way.

The No. 3 paid TV service in America behind Comcast (NSDQ: CMCSA) and DirecTV (NYSE: DTV) reported earnings of $313 million for the October-through-December period, up from $252 million a year prior. Revenue was also up 13 percent to $3.63 billion. And Dish added 22,000 subscribers in the quarter, ending a lengthy customer drought. Dish now has about 14 million U.S. subscribers. All of these metrics met or beat the forecasts of analysts.

“By introducing new Blockbuster-branded services, we’ve begun to turn the tide in subscriber losses while continuing to face increased competitive pressures,” Dish CEO Joe Clayton said in a statement. Dish paid $228 million in cash last April to acquire Blockbuster out of bankruptcy. It then launched a Blockbuster-branded streaming service in October, bundling it with its satellite video service and diversifying its business in the face of a maturing U.S. pay-TV subscription market.

Dish’s competitors are also getting into the internet movie-streaming game, with Comcast announcing a new service called Streampix earlier this week. While Dish seems pleased with the competitive juice that Blockbuster’s streaming operation is giving it, the satellite company seems determined to slowly back away from Blockbuster’s physical rental-chain roots. Citing competition from kiosk operators like Redbox, Dish said it’s closing around 500 Blockbuster stores with expiring leases. It also said it “may close” additional stores. With Dish proving successful so far in its objective to transition Blockbuster into a brand for streaming video content, it seems unlikely the company will have any interest in operating the remaining brick and mortar stores beyond the lifespan of their lease agreements.

Meanwhile, Dish chairman Charlie Ergen said the company eagerly awaits the Federal Communication Commission’s approval decision on its $1.4 billion acquisition of bankrupt wireless spectrum company TerreStar. With spiraling programming cost cutting into the margins of the pay TV business, cable has found relief in broadband services. For its part, Dish is looking to augment its portfolio with a new wireless broadband service, too. The FCC has set a March 12 deadline for its decision.

“It would transform not only our company but the way people use wireless in the United States,” Ergen told investors Thursday. “The business we’re in today and wireless (broadband) are a package deal. Right now the cable industry is best positioned to take advantage of that. I hope the administration wants some competition to that.”