Mindy, a lot of the major rental houses here have shrunk their video sections, too.
Hollywood Video, Blockbuster, Family Video, Movie Gallery. It's bizarre - the stores are, in many cases, subdivided with a temporary wall that looks out of place or a big curtain to portion the store out to half the size it was. The exterior is still what it is (although I notice burned out signs and lighting are being left un-replaced). It's weird, though, to see the exterior done up as a video place but to look through the glass and see a cellular kiosk corner, computer repair, or whatever. Haven't seen mismatched things like that since MC.
Or, some of them have the other half of the store turned into video game rentals, which seems to make good use of existing shelving, storage slots, etc. DVD and CD game rentals are taking over and the movie rentals are dwindling.
I'm with you - why pay $4 to get a scratched DVD you had to stand in line for (behind the teenage boys renting 48 game titles a piece) that is due back by 5pm in three days when you could just stream from Netflix, grab a RedBox title at the grocery store or McDonalds, for a lot less? When I do get a DVD from Netflix (I mostly stream) at least nobody cares when it's returned.
I think Netflix, however, will survive. Studios are going to hold out as long as possible but eventually I think they'll begrudgingly cave in to the new model. At least I'll hold out hope.