There are plenty of times when being confused and 'out of touch' is better than pretending to know what's going on when people are being irrational. This is probably not the case with Blockbuster, but they don't have the resources to emulate Netflix. Their best bet is to hold on to a gradually declining customer base, and eventually liquidate.

You don't have to know what's going on when people are being irrational. (And besides, we're being irrational almost all the time.) You only have to know how to charge us for being irrational.