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What to Expect as Blockbuster Heads to Auction

Friday, 1 Apr 2011 | 6:27 PM ET

Blockbuster is heading to the auction block Monday and sources tell me the company's expecting a "robust bidding process." One attorney put it more bluntly: "bring lots of Power Bars." This will be a long auction process. But by the end of the day Monday we should know what the highest or "best" bid is. It's not just who offers the most, it's what they plan to do with the company.

AP

Sources tell me Carl Icahn, Dish Network and South Korea's SK Telecom, are all bidding for the company, along with a couple lesser-known names, which my sources would not disclose. These interested buyers are up against a group of hedge funds led by Monarch Alternative Capital, for about $290 million.

Monarch is looking for an orderly liquidation of Blockbuster's assets, which include those brick-and-mortar stores along with Blockbuster's digital distribution businesses. But sources tell me that rather than splitting up the company and selling it for parts, there's great interest in finding a strategic buyer, who could make more of Blockbuster's assets than they're worth right now.

Here's what to expect from the bidders.

Dish Network — Dish could use Blockbuster's rental services to differentiate from its competition and keep subscribers from "cutting the cord." Blockbuster would bring Dish more on-demand content, and Dish could even offer subscribers free access to Blockbuster-by-mail, its version of Netflix's DVD-by-mail service. Blockbuster had success as an early retailer of DirecTV, so we can expect Dish to market its services in Blockbuster stores, to try to reach new subscribers.

South Korea's SK Telecom — For SK Telecom, Blockbuster represents a globally-recognizable brand, which could help it grow in what's an incredibly saturated market. For the mobile carrier, Blockbuster's most valuable asset is likely its mobile on-demand service, which is currently baked into Motorola , Samsung and HTC devices in the US and carried by most domestic carriers. SK Telecom could expand that service overseas. Blockbuster's distribution deals with studios are specific to US distribution, so it's unclear how transferable those rights are to overseas markets. But certainly Blockbuster has the infrastructure in place to negotiate those deals internationally as well.

Carl Icahn — Icahn isn't technically a strategic bidder, but he's invested in other companies, including Lionsgate and MGM, which could have synergies down the road. Blockbuster along with stakes of those two studios gives Icahn a piece of every part of the entertainment business — from production and theatrical distribution, to digital distribution and rentals. Sources tell me that Icahn is particularly interested in Blockbuster's digital distribution assets and capabilities, and would be interested in pushing the company further away from its brick-and-mortar roots to be more of a digital giant like Netflix .

Questions? Comments? MediaMoney@cnbc.com

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  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.