Blockbuster say digital distribution had a big impact on their demise such as the Netflix video streaming (view once, not keep) service, though I would say rampant illegal downloading of movies played a big part too.
Paying for subscriptions to Netflix is one thing some choose to do, but the door is wide open for people to illegally download (and permanently keep) 1000's of movies (virtually any movie that has been made) and view them whenever they like, for free. Note you can save Netflix movie streams illegally too, though with some effort.
For example, for the purpose of indicating how endemic the problem is, shown below is somewhere in cyberspace where people can download movies (for free illegally). The green 'Seed' column (as far as I understand) are the number of people sharing that movie for other people to copy from them. The number of people who actually have downloaded that movie is far more than that I presume as not everyone shares what they download for others to copy.
The above is what I reckon is a significant contributor to the demise of bricks and mortar video stores.
