Sometimes it's a mistake to think about how these companies could pivot to adapt to new technology. A major feature of capitalism is that companies are (relatively) unimportant and it's the market and society that really matter. Without companies collapsing, it can be really difficult to recycle the manpower and capital invested in obsolete business models.

Blockbuster's organizational, legal and physical infrastructure was wholly devoted to video rental via physical stores. Decommissioning those organizational components and creating the systems necessary to spin up and run an online video portal would have required changes in the company so massive that it would effectively be a different company.

Even if Blockbuster had bought Netflix early on, Blockbuster would have been left running an organization they did not understand in a market that only vaguely resembled something it was familiar with. Even worse, and totally contrary to modern management theory, management skills alone are necessary but not sufficient to operate a growing and dynamic company on the forefront of technology. The entire management organization of Blockbuster would have been totally unequal to the task of operating Netflix competently.