Remember 8-tracks, cassette tapes, VHS, and Beta-max? They are all gone of the way of dinosaurs (the first four) or on the way out (VHS). They all were replaced by better means of recording music and video.
Well, you know what else may be on the way out? CDs and DVDs. Not necessarily because there is a "hard-copy" replacement for them (well, Blue-ray will soon replace DVDs), but because we can get so much on-line on the internet or directly through our TVs (on-demand programming).
To wit, check out this article from the LA Times. Nearly half of teenagers (48%) bought ZERO CDs in 2007 (up from 38% in 2006). 29 Million people bought music legally on-line. Why buy CDs when you can cram thousands of songs onto Apple's wonderful iPOD or iPhone.
As for movies, the same can be said...there is less and less of a need to buy DVDs. Personally, I haven't been to Blockbuster in months. There is little need to go there. There are so many movies on Comcast on-demand and on websites, such as this one that follows, that has all of the recent releases on-line: http://www.free-tv-video-online.info/ Some of the movies are filmed by a camcorder, but others are DVD quality. Look around and enjoy. I recently watched Juno and Michael Clayton on there...both very good movies. Also, Apple's i-Tunes allows you to download movies in DVD quality to your computer for either $2.99 or $3.99.
As an investor, I would not be being stock in Blockbuster or Netflix.