Honestly, I have mixed opinions about this kind of thing especially given the way "project $10" is working out. I think video game rentals will wind up dying out before the used game market will because of things like that
As far as Blockbuster goes... well I have a bit of nostolgia about the whole video rental business. I used to love to wander around video stores, looking for things to rent, and taking a look at tons of direct-to-video movies that I had otherwise never heard of, occasionally finding some real gems hidden among the mountains of schlock.
I still remember when "Blockbuster" was the ogre, the "Wal*Mart" of it's industry, destroying the mom and pops video operations who couldn't compete with them. That annoyed me at the time (though I used them like everyone else), and now I'm sad to see the ogre itself collapsing. On a lot of levels I'm sort of hoping that it will somehow manage to recover.
One of the things that concerns me about this is that as a fan of horror movies and such, I think it's going to hurt the small 'direct to video' production market, especially as far as the kinds of over the top movies I tend to like. See it was relatively easy to get away with doing some really over the top stuff for direct-to-rental movies and release it under the radar. With streaming video and services like "Netflix" I think it gives censors and "prudes" a much easier way to target things, having them taken off the main lists and such, and you can't request something and find it with a search if you don't know it exists.
Probably unfounded, and so far not a problem, but when the video stores finally do disapear if they don't recover, I think it will have a profound effect on the production of smaller scale films.
To put things into perspective, I'm reluctant to pay $15 for a cheezy horror movie in hopes that it's the entertaining kind of cheezy instead of just plain bad. On the other hand paying like $3.50 or whatever for a video rental was a lot differant. With Netflix it's even cheaper, and currently it has a lot of stuff like this (a lot of it streamed) but when the video stores go I think it will not be produced as much anymore since I think a lot of the videos of the sort that make it to Netflix get there after having been produced for the physical rental market and still sort of supported by that.