The premium online video sector is going to heat up as DiSH Network was given the nod in the recent Blockbuster auction and the U.S. Bankruptcy Court for the Southern District of New York approved the deal. DISH’s offer of $320.6 million was selected as the successful bid following an auction conducted earlier this week, including the online service assets I imagine.Blockbuster already had a premium online video-on-demand service in place which means that DiSH could not even bother to rebrand the service and just continue it. It also gives them a vast library of titles at their disposal for rental and revenue generation. They could simply make an on-demand Blockbuster channel for their subscribers I imagine.

But the more interesting facet of the deal, to me anyway, is what it does to the online video-on-demand landscape. Blockbuster has been failing for some time and I bet some of  you didn’t even know that you could rent on-demand from them. With the combination of DiSH’s subscribers and distribution and now the assets of Blockbuster they could become a contender in a burgeoning premium online video arena.

This could pit them directly against Netflix who rents both physical discs and streams content online. The same goes for Amazon who just started offering loads of video streaming content to Prime members, a service which I likened to Blockbuster stores themselves in fact, and sells discs.

It could make for a four-horse race in regards to streaming films online until someone else like Google gets into the full swing of things with new YouTube initiatives or whatever. Who is that fourth horse?

Let’s not forget about Best Buy who has Cinema Now and over 1,500 titles in that service ready to sell/rent to you. They also have some international distribution. While writing this article I signed up, installed the RoxioNow Player (which doesn’t give you an option of where to install, which I hate) and even rented a film for $1.99 and am downloading the film to watch now. Netflix, Amazon and Blockbuster can’t do that as they’re all US only except for Netflix Canada. Granted, the selection for Cinema Now international is quite limited (18 rentable, 108 purchasable) but still, it seems they are leading the pack already in regards to crossing international borders.

This could all be bad for Netflix who has been having trouble with some studios that don’t want to provide them with all their content anymore. Of course, they have, like YouTube, already looked to buying and producing their own content and therefore cutting out the middle man (broadcasters) and going straight to the production companies to get new content. This might also be what DiSHBuster will have to do as well in order to continue to compete. That could then give us a three prong online video race (much like TV used to be with just three networks coincidentally).

Since Amazon and Best Buy are first and foremost retail outlets, they could still benefit by then selling disc versions of the others’ content and generating revenue as well as perhaps licensing some for streaming through their own services. In fact, the events of the first quarter of 2011 could be the very first major shift in how video is created, licensed and distributed. That will certainly give us something to talk about in the coming month.