Yesterday I read that Blockbuster is filing for Chapter 11 bankruptcy.  Apparently they're about ONE BILLION DOLLARS in debt.  Even if their stock price hadn't already been steadily declining for more than ten years I can't see how this development could really surprise anyone.  I'm sure some people will blame BitTorrent, other peer-to-peer services, and piracy in general for Blockbuster's fall from glory but I don't buy it.  I'll explain why...

Technology advances continuously, yet it seems Blockbuster's business model never really changes.  Where technical innovation is a core focus for other media outlets Blockbuster has basically stuck to the same strategy they always have.  It was only recently that Blockbuster did anything to diversify away from their physical store model, but it was purely a reaction to what their competitors were doing.  Blockbuster has failed to innovate in an industry that oddly enough, they helped define and popularize 25 years ago.
In times of yore customers had only a few options for watching a movie.  These consisted of:
1.) Go to the theatre/drive in.  The problems being only new releases available, it's expensive, and the schedule isn't flexible.
2.) Subscribe to cable/satellite T.V.  Also a fairly significant expense and without scheduling options, but more variety.
3.) Buy or rent a movie from a store like (but not limited to) Blockbuster.
4.) ... well that's about it.  
Media consumers of today have several more options in addition to those that have always been available.  Services from cable and satellite providers like digital on-demand and DVR capabilities are available in most areas.  Mail-based rental companies like NetFlix will send discs right to your home with no return dates or late fees.  Vending machines and kiosks like Redbox are popping up in convenient locations everywhere.  Online on-demand services are also available and growing in popularity.  NetFlix now offers this service in addition to their disc-by-mail delivery method.  Even game consoles are getting in on the action with movie rentals available via an internet connection.  Blockbuster tried to get into the online rental and on-demand services, but did it way too late.  They also charge more and their interface is nowhere near as clean as their competition.  These direct competitors have already beaten Blockbuster in two areas: convenience and overhead.  If you can watch a movie at any time without the need to make special trips to rent and return a DVD then why would you bother with going there?  With all the stores and the costs associated with maintaining and staffing them how can Blockbuster expect to compete?
The next point should be obvious - Don't fuck your customers around.  Ridiculous overcharging and late fees are just going to piss people off and make them look for another place to rent from.  Blockbuster could get away with this behaviour when they were the only kid in the sandbox, but now that customers have other options they're going to go elsewhere.  "But we don't charge late fees anymore!" Blockbuster says.  That's right...now if you forget to return a movie they don't charge you a late fee, they just assume you want to keep their scratched to shit disc and charge you the full price as if you bought it!  (By my observation, their prices to purchase new movies are also higher than their competition in most cases, but I digress.)
Back to the piracy debate - I still maintain that piracy via peer-to-peer technologies like BitTorrent is not a primary factor in Blockbuster's decline.  If P2P was the scourge that groups like the RIAA and MPAA make it out to be then the music and movie industries would be in ruins.  That doesn't mean these technologies won't play a large role in media delivery as they mature.  Companies will capitalize on the popularity of P2P and find a way to monetize it.
Blockbuster maintains that this is simply a restructring strategy, but before everything is through I expect to see many if not all Blockbuster stores close their doors for good.  The only problem I see with that is the possibility that with Blockbuster out of the picture it's competitors will have no reason not to jack up their prices.  Fortunately without the cost of a physical storefront it requires a lot less capital to get into the movie rental business.  Hopefully that will translate into more new companies and therefor more competion keeping everybody honest.