Blockbuster has been moving aggressively the past year or so to combat the rise of Netflix and that potential threat to its retail business. Physical stores have loosened rental terms and lowered prices, Blockbuster has created its own mail-oriented rental service (called "Total Access") and now is moving to get a foothold in the nascent legal movie-download industry.

Blockbuster has been courting Movielink for at least most of 2007 but couldn't come to terms earlier. Current plans seem to be to continue to operate Movielink as a separately branded subsidiary but that won't last. Blockbuster has to integrate its offerings to maximize customer convenience in part because that's what Netflix bases its service around and in part because other competitors aren't going to sit still.

According to the AP story - here on Forbes.com - Netflix remains larger in absolute terms, but Blockbuster is growing faster. At this point I think the market for home movies is far from tapped out and both players should grow significantly, as well as seeing stiff competition from new entrants.