In an effort to bolster their on-demand video services, Dish Network has acquired floundering video rental chain Blockbuster Video after an all-day bidding war on Tuesday. The Charlie Ergen-owned Dish Network bid a reported $320 million, beating out a group led by Blockbuster investor Carl Icahn -- a man who once called Blockbuster “the worst investment I ever made” – who by many was considered the favorite going into Tuesday’s auction.

The deal is still subject to approval from the bankruptcy court, but Dish says they expect it to be finalized by end of the second quarter of 2011.

“With its more than 1,700 store locations, a highly recognizable brand and multiple methods of delivery, Blockbuster will complement our existing video offerings while presenting cross-marketing and service extension opportunities for Dish Network,” said Tom Cullen, executive vice president of Sales, Marketing and Programming for Dish Network in a statement. “While Blockbuster’s business faces significant challenges, we look forward to working with its employees to re-establish Blockbuster’s brand as a leader in video entertainment.”

While Dish’s main motivation in snatching up Blockbuster seems centered around the company’s on-demand offerings, Dish insists that they plan to continue operating Blockbuster stores as well. Dish hasn’t given any indication of just how many of Blockbuster’s brick and mortar locations will remain open, but considering Icahn had partnered with liquidators, it’s clear that Dish’s purchase of the company is a best-case scenario for thousands of Blockbuster store employees that wish to stay employed.

[via THR]

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