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(Reuters) - Dish Network said on Wednesday it will close all 300 or so retail locations of the Blockbuster video rental chain by January, closing a chapter on a brand that failed to compete in the digital world.

Dish plans to lay off as many as 2,800 employees.

Dish, the second-largest U.S. satellite TV company, bought the failed Blockbuster LLC video rental chain in a bankruptcy auction in 2011 for $320 million, a dramatic fall for a brand that at its peak in 2002 had a market value of $5 billion.

Dish had initially planned to keep 1,500 stores open and retain 15,000 employees, or about 90 percent of the outlets at the time after its acquisition. It has been gradually shutting stores and laying off employees.

"This is not an easy decision, yet consumer demand is clearly moving to digital distribution of video entertainment," said Dish's Chief Executive Joe Clayton in a statement.

Online retailers like Amazon.com Inc and online sites such as Apple Inc's iTunes and Netflix have eaten away at Blockbuster's business model for years. Blockbuster was founded in 1985 when video cassette recorders were becoming a fixture in U.S. homes.

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