Why did Blockbuster fail to buy Netflix?

The common interpretation of the story is one of a new innovator versus an old dinosaur.  Supposedly, Blockbuster didn't see the value in Neflix and didn't see streaming as the future.  According to this story, the old dinosaur, Blockbuster, died out and a new champion emerged: Netflix. 

But this ignores reality a bit.  At the time Blockbuster was looking at acquiring Netflix, the company was mostly a DVD by mail business.  I think they did a little bit of streaming but not much.  Marc Randolph, the co-founder and first CEO of Netflix has a new book out about the establishment and first years of Netflix (he left the company after a few years).  According to him, everyone in the movie rental business already saw streaming as the future when Netflix was founded.  He says that they were lucky to have gotten in when DVDs where still the main source of home viewing of films and before digital downloads and streaming took off.  He also talks about the effort they made to sell the company to Blockbuster, and the story he tells is different than the conventional wisdom which portrays Blockbuster as lacking vision or belief in Netflix.  According to him, Netflix had acquired a massive amount of debt in their frantic effort to expand.  Blockbuster, in his telling, did see the value in Netflix and wanted to buy the company.  But the amount they were offering just wasn't enough for the Netflix owners to accept.  They needed more money to make it worth their while and Blockbuster just wasn't willing to give them that.

Their ego was too inflated and thought that they could never be taken down. When it looked like Netflix mightve had something, Blockbuster tried movies by mail and ordering them online, but it was too late.

That was the biggest failure in modern corporate history.  They failed to change and adapt to the times. 

Blockbuster management thought that they had the superior product and that Netflix was just a fad.