Dish Network wins auction for Blockbuster

Blockbuster, the international DVD rental business which collapsed into bankruptcy last year, has a new owner today, after the US satellite broadcaster Dish Network won a $321m (£196m) auction of the company.

Controlled by the Colorado billionaire Charlie Ergen, Dish Network is the third-largest satellite group in the US and its acquisition of Blockbuster is an ambitious attempt to take advantage of upheavals in the world of broadcasting.

Mr Ergen is expected to expand Blockbuster's nascent internet-streaming business, which offers online movie rentals, as well as using some of the company's 1,700 high-street stores to sell satellite dishes and Dish Network services.

Internet video is emerging as a major threat to traditional cable and satellite television companies, particularly in the US, where new businesses such as Netflix and Hulu offer television shows and movies on demand.

Dish Network shares lagged behind the rising stock market yesterday, however, as questions remained over how the company plans to deal with Blockbuster's traditional DVD-rental business, which has fallen deep into the red. Several of the rival bidders in yesterday's auction planned to shut its network of stores down completely, but Mr Ergen's vice-president of sales and programming at Dish Network, Tom Cullen, signalled Blockbuster would continue to be run as a going concern. "With its more than 1,700 store locations, a highly recognisable brand and multiple methods of delivery, Blockbuster will complement our existing video offerings while presenting cross-marketing and service extension opportunities for Dish Network," he said.

Mr Cullen admitted the business had "significant challenges", but laid out no details about how many store closures, if any, the new owners might pursue. Also up for debate will be the company's plans for Blockbuster's international subsidiaries, including a UK arm that has about 600 stores.

The US-listed parent company collapsed last September after years of financial difficulties, brought on by the arrival of cheaper competitors, including Netflix, which began renting DVDs through the mail, and Redbox, which used a network of kiosks instead of expensive high-street stores. New digital services, including Blockbuster On Demand, through which users could rent movies to watch on their computer or smartphone, came too late to save the company.

Blockbuster creditors are expected to receive about $178.8m of Dish Network's $321m bid.

The auction was held over a 15-hour period, starting in the bankruptcy court in Manhattan, where the courtroom was converted into a makeshift auction house, and then decamping to a nearby law firm. Dish Network emerged victorious at about 1.25am yesterday. Thwarted bidders included the billionaire raider Carl Icahn, who owns a large chunk of Blockbuster's debt, the South Korean telephone company SK Telecom, and a team of liquidators comprising Gordon Brothers and Hilco Merchant.

The deal is the latest in a series of acquisitions pursued by Mr Ergen, through both Dish Network and a sister company, Echostar. The 58-year-old poker enthusiast, who started in business selling satellite dishes from the back of his van in 1980, has also been buying companies that own parts of the wireless spectrum, anticipating the rise of mobile internet-based video.

Analysts said Mr Ergen appeared to want to protect his broadcasting business from new rivals, and to become a major player in the new digital-broadcasting landscape.