Netflix's original model was to showcase older movies (presumably) cheaper than new releases. These were the campy sci-fi that would appeal to younger guys. They also appealed to techies who would consider streaming and pushing the limits on their ISPs.
Good observation on BB not knowing what to do with Netflix. The timing and cost model was enough to make it fail at the time.
In the beginning Netflix was DVDs via the mail. Streaming was almost unheard of because everything was done via phone modem and there were severe FCC restrictions on maximum speeds. When you became a member you would just order what you wanted, they sent it with a return envelope, and you mailed it back when done. With membership you could do this as many times as you wanted. It should have fit right in at Blockbuster but they didn’t catch on. If they had some folks with ingenuity they would have been able to transfer that to streaming when faster options for Internet service came online.
Like I wrote, the corporate inertia at Blockbuster would not let them take chances and innovate.