3 Reasons for Netflix to Worry About Blockbuster

In a move that is long overdue -- like returning that Blockbuster copy of Turner & Hooch that mistakenly sat as a beer coaster for a couple of weeks a few years ago -- DISH Network's (NAS: DISH) Blockbuster is finally beefing up its streaming offering.

The "stream come true" press event that Blockbuster has scheduled for later today hints a Netflix-like service at a time when Netflix (NAS: NFLX) can't afford to ignore the challenge.

Let's go over a few of the reasons to pay attention.

1. Blockbuster jokes aren't funny anymore
As far as brand names go, Blockbuster has been the butt of couch potato jokes over the past decade. However, I think Netflix has been more lampooned and publicly dissed these past few weeks than Blockbuster has been razzed in several years.

In other words, Netflix shareholders can't dismiss the potential of a Blockbuster streaming smorgasbord because of how uncool it is while it's wearing a "kick me" sign on its wedgied back.

2. Blockbuster now has streaming and premium video on demand
Netflix will eventually realize that it will need to serve up fresher content to its subscribers, especially now that new DVD releases will be going out through a separate Qwikster (insert your own Qwikster joke here to prove my first point) website. Blockbuster has been serving up piecemeal rentals for a few years now.

In other words, Blockbuster has beaten Netflix to the punch when it comes to being a one-stop shop of digital video entertainment. It's Netflix circa 2004.

3. Disgruntled Netflix subscribers are exploring alternatives
Frustrated Netflix users would shake their fists in the air in the past -- and little else. Where were they going to go? No one was doing what Netflix was doing. Well, times have changed. Amazon.com (NAS: AMZN) is now up to 8,000 titles through its unlimited streaming offering. Coinstar's (NAS: CSTR) Redbox has been teasing the market about a digital strategy for more than a year.

If Blockbuster is serious about mattering, a suddenly vulnerable Netflix needs to take this threat seriously.

If you want to see what happens next, consider addingNetflixandDISH Networkto My Watchlist.

At the time thisarticle was published Motley Fool newsletter services have recommended buying shares of Amazon.com and Netflix. Motley Fool newsletter services have recommended creating a bear put spread position in Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story except for Netflix. Rick is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.

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