It's not that they do not understand this. It's often not in their short-term interest to go digital. Imagine being in Sony's position trying to sell their blu-ray products. Why promote an alternative form of content distribution?
I agree with you, but their short-term interests are putting them out of business. Businesses that take a long-term approach are the ones that are winning (Amazon and Toyota spring to mind).
Point being I don't think anyone can compete with Netflix right now. They've done everything right. Blockbuster deserves to loose because their short-term interests were to delay and drag their feet.
