Dish Said to Stream Blockbuster Films to Challenge Netflix

Dish Network Corp. (DISH), the second largest U.S. satellite-TV provider, will introduce a Blockbuster streaming-movie service to compete with Netflix Inc. (NFLX) next month, according to a person with direct knowledge of the plans.

The timing is designed to coincide with price increases being implemented by Netflix, according to the person, who declined to be named because Dish’s new offering isn’t public. Starting this month, Netflix said it will charge separate fees for mail-order and streaming videos, raising the price by 60 percent to $15.98 for customers who want both options. Dish hasn’t set a price for its rival service, the person said.

Dish acquired almost all of Blockbuster’s assets in April for $320 million out of bankruptcy. The company is trying to transform Blockbuster into a business that can compete online with Netflix, Amazon.com Inc. (AMZN) and Hulu LLC. U.S. residents watched an average 4 hours 33 minutes of video on the Internet monthly in the first quarter, a 35 percent increase from a year earlier, according to a Nielsen Holdings NV report.

“This ought to begin changing the way investors think about Dish,” said Ryan Vineyard, an analyst at RBC Capital Markets in New York. “It goes from being an old-school pay-TV company to launching what could be a really high-growth business.”

Dish, based in Englewood, Colorado, fell 70 cents, or 2.8 percent, to $24.30 at 4 p.m. New York time on the Nasdaq Stock Market, paring a decline of as much as 4.9 percent earlier in the day. Netflix dropped $20.16, or 8.6 percent, to $213.11. The Standard & Poor’s 500 Index declined 2.5 percent following a report showing American job growth stalled in August.

Streaming Service

Aaron Johnson, a spokesman for Dish, declined to comment. The new service may also include on-demand Blockbuster movies that Dish satellite customers can watch on television sets, the person said. Blockbuster may offer the streaming service in conjunction with its mail-order and in-store DVD rentals.

Dish has been negotiating rights with studios since it acquired Blockbuster, which already had certain contracts in place coming out of bankruptcy. Discussions with studios typically include authentication and online rights as well as other programming rights.

While Blockbuster.com offers on-demand movies for one-time purchase, this would be its first subscription-based streaming service. The new option would complement Blockbuster On Demand, which allows users to watch content on personal computers, mobile devices and DVRs.

Starz Movies

The offering is expected to include movies from Starz LLC, said the person. Starz announced yesterday it had halted negotiations with Netflix to renew an online-viewing deal for next year.

Netflix, based in Los Gatos, California, has 24.6 million U.S. customers and a library 20,000 movies and television shows available online.

“Netflix leads a big, growing market, and big, growing markets always attract competition,” said Netflix spokesman Steve Swasey.

Seattle-based Amazon announced in February it would give its Prime members instant streaming of movies and TV shows. Prime membership costs $79 annually and gives subscribers free two-day shipping and access to more than 9,000 shows and films.

Hulu, the Los Angeles-based web service that for sale, had 875,000 paid subscribers at the end of June and said yesterday it was starting service in Japan. Dish was one of the companies interested in acquiring Hulu, two people familiar with the process said in July.

Dish ranks second in the U.S. satellite-TV behind DirecTV (DTV), based in El Segundo, California.

To contact the reporter on this story: Alex Sherman in New York at asherman6@bloomberg.net.

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net

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