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What the Blockbuster Buyout Means for Netflix

NEW YORK ( TheStreet) -- Now that Dish Network (DISH - Get Report) is purchasing Blockbuster (BLOAQ.PK), is it time for Netflix (NFLX - Get Report) to fear the flailing movie rental chain?

While Dish Network has yet to reveal exactly what it will do with Blockbuster, one possibility is creating a subscription streaming service to compete with Netflix.

>Dish Network's Blockbuster Bid: $320 Million

By acquiring Blockbuster, Dish would presumably get the company's streaming rights for the libraries of all the major studios, as well as the Blockbuster brand and customer list. Combined with Dish's wireless spectrum that it has acquired and technology from sister firm, EchoStar, Kaufman Bros. analyst Todd Mitchell noted that the joint entity could feasibly launch a video service.

If successful, what would this mean for Netflix?

At least in the short term, probably not much. Netflix boasts 20 million subscribers to its DVD-by-mail and subscription programs.

>What Will Dish Network Do With Blockbuster?

But the company has been intently focused on growing its streaming base, rolling out a streaming-only package for $7.99, late last year.

It is also aggressively expanding its streaming library, recently announcing it won first-streaming rights for "House of Cards," a new series starring Kevin Spacey and directed by David Fincher. Netflix also began streaming episodes of "Glee," "The Wonder Years," and "Sons of Anarchy" in a new deal with Twentieth Century Fox.

>Blockbuster Timeline: From Opening to Closing Credits

And on Wednesday, the company said it will begin streaming episodes of "Mad Men" after entering into an agreement with Lionsgate.

It's also worth noting that neither Dish nor Blockbuster has had much luck in the past with online expansion. "It's hard for us to believe Dish would be poised to successfully transform Blockbuster from a money-losing bricks-and-mortar movie rental retailer to a scaled subscription online streaming service," Deutsche Bank analyst Doug Mitchelson wrote in a note.

--Written by Jeanine Poggi in New York.

>To contact the writer of this article, click here: Jeanine Poggi.

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