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But when I told Kevin Lewis that I was worried about whether Blockbuster could survive, his face contorted. Lewis is Blockbusteras senior vice-president of digital entertainment, and he is a man who believes in his employer. A few weeks ago, I met with him and two other guys in charge of Blockbusteras digital strategy at the companyas loft office space in downtown Manhattan. Itas meant to be the headquarters for the digital teamathe group of staffers who carry the weight of Blockbusteras future. On the day I visited, none of the staffers were in the office. I suppressed the urge to see a metaphor where there wasnat one. (They were all traveling.)

Blockbuster, I was told over and over again, is poised for a comeback. Its brand is more established than any other. Itas the only company that can offer movies in stores, in kiosks, online, and by mail. Most importantly, just because more and more Americans watch movies onlineawhether it be through Web-connected computers, Blu-Ray players, or DVRsadoesnat mean they want to stop watching the newest movies. Netflix and Redbox canat provide those when they first come out. Blockbuster is proud that it canaso proud that this is the first thing you see on its homepage:

The companyas final, last-gasp strategy to regain its swagger and prepare for the future is to harp on this fact over and over again. Lewis would not stop mentioning the amultichannel consumeraathe ideal people who aare in stores, they’re renting digitally, they’re going to kiosks, they’re buying VOD, they’re going to theaters. Theyare entertainment omnivoresa|Weare the only company that spans alla|of those (channels).a And these omnivores want their movies as soon as they can. According to Lewis, 70 percent of new rentals happen in their first 30 days of release.

When you combine all this, the motto is essentially that Blockbuster is the only place that can get you what you want, when you want it, how you want it. Taken as a whole, thatas true. But when you break down the motto to its three partsawhat you want, when you want, how you wantathings get far more muddled, and for Blockbuster, far more dire.

In Blockbusteras view, it can survive because of the chart below. It shows last yearas top-10 grossing movies that are available digitally. Lewis bragged that all of them are on Blockbuster; none are on Netflix. Itas an especially important detail, as more than half of Netflix subscribers are now streaming movies. At my request, Blockbusteras PR rep sent the chart over:

Netflix canat stream those movies online because the studios wonat let them. Compared with Blockbusteras well-stocked shelves, Netflixas digital library is like a food pantry that contains only peanut butter and jelly. Netflix has made deals with several studios that give them a larger digital catalog, but it also forces them to wait 28 days to start sending them to customers the old-fashioned way: on disc. Similarly, Redbox, the king of kiosks, is being forced to delay the release of movies as a peace offering to the studios.

On this issue, Blockbuster is right; itas far better digitally than Netflix. Blockbuster can offer digital downloads because it asks customers to pay for digital movies the same way they rent DVDsaa la carte. (The studios prefer this to Netflixas come-one, come-all digital strategy.) Renting a movie on Blockbuster runs $4.

Of course, theyare not the only company that can do that. Steve Jobs long ago realized Blockbuster was on the ropes and decided to provide an alternative. So letas amend that chart.

Nearly all are on iTunes. But thatas not the whole picture, either. If digital downloads are to be a success, theyare going to be watched on an actual TV, not on the computer screen. Netflix knows this, which is why itas putting its Watch Instantly service on every Blu-Ray, TiVo, and game console known to man. Blockbuster is trying to do the same. By the end of the year it claims itall be on nearly every brand of Web-enabled TV and Blu-Ray device sold. Of course, once these services migrate off the computer and on to the TV, theyare contending with a new force: on-demand. Cable providers have steadily added to their pay-per-view offerings. Iam trotting the chart back out, this time with a new Comcast On-Demand column added.

So Blockbuster and Comcast On-Demand are identical for at least in this small sample. Blockbusteras strategy is to double-down on these new releases because Netflix and RedBox donat have them. But if cable providers do, that invalidates Blockbusteras claim on the space. Itas correct that Netflix and Redbox have been Blockbusteras greatest enemies over the last few years. But moving forward, itas a different kind of netbox that will eventually beat Blockbusteras: the cable box.

The last piece of Blockbusteras motto left standing is its assertion that itas the premiere place you can get these films when you want them. On-Demand will soon make that moot, as well. The film industry has finally wised up and realized it doesnat need middlemen like Blockbuster anymore. It can use the cable operators instead. Last month, the New York Times reported that studios were collectively marketing on-demand cable as the best way to get their content. Theyare tossing $30 million at it, mainly because they get 65 cents from every dollar spent on on-demand, compared with roughly 25 cents at Blockbuster. As of now, not all movies get released via on-demand at the same time theyare released on Blockbuster. But Comcast told me it has more movies on-demand this year than ever before, and itas getting them sooner than it had in the past. Several of the on-demand movies from the previous chart were on-demand the same day they were available for rental at Blockbuster. Given the 65-cents versus 25-cents economics, one would figure that trend will only hold.

To be fair, Blockbusteras big strategy isnat just that it offers the movies you want, where you want them, when you want them. Itas that theyare the only place that can deliver all three at the same time. True enough. Blockbuster is readying a massive database of where all of its movies are available. This way if you want to rent, say, GoodFellas, and itas not available online, the database will tell you itas down the street at a retail location or available through Blockbusteras Netflix-like DVD-by-mail service. Itas the integrated service for the Blockbuster diehard.

But in an age of iPads, Boxees, and Netflixes, how many Blockbuster diehards can there be? This is the age of gadget diversity. We donat need or want one megalith to handle all our video needs. (Only Apple [AAPL] has managed to create the kind of cultish walled-garden that Blockbuster daydreams about.) And even for the less tech-inclinedaif a video is available on their cable box, why go outside and get it from a retail store? Or even from the Blu-Ray player that has Blockbuster DVDs. When I was at Blockbusteras digital office, their crew told me how pleased they were to be the first thing people see when they boot up a Samsung Blu-Ray player. But compared with cable on-demand, that Blu-Ray player is still a secondary option. That means Blockbuster is, too.

That leaves Blockbusteras brick-and-mortar retail business as its one unique characteristic. Of course, brick-and-mortar is what got Blockbuster into this mess in the first place. The same social trends that forced Blockbuster to shutter those stores donat look like theyare ebbing any time soon. Back-catalog movies are still available through RedBox and Netflix for far less than Blockbuster sells them for in stores. Broadband is becoming more and more prevalent in the country every day, allowing more people to download videos and skip the drive to the strip mall. Blockbuster isnat just running out of time and money. Itas running out of customers. Unfortunately, those arenat available on demand.

They were wrong. Something about buying a gallon of milk without someone actually selling it was too sterile, too cold. (Or maybe the fear was that it wasnat cold enough.)

But all was not lost. At the same time McDonaldas released the convenience-store units, it also put 12 DVD kiosks into the field. People werenat as untrusting toward an automated purchase of something they didnat have to eat. They were still consuming; they just werenat ingesting.

Since then, Redbox has seemingly added an automated kiosk for every closing of a manned video-rental shop. In six and a half years, it has gone from those 12 trial units to 22,400. Thanks to Redbox, Netflix (NFLX), and the rise of On Demand (both through cable and the Internet), the process of renting a movie has been completely disrupted. Blockbuster is either teetering on the edge of bankruptcy or pretending itas not already there, and mom-and-pop rental stores have all but disappeared from small towns. Redbox is as responsible for the destruction as the rest of the hydra.

But at some point this new monster is going to run out of things to destroy. And when it does, itas going to have to start turning on itself. Last week, word got out that Redbox was thinking about streaming movies over the Internet, just like all of its other competitors. If it happened, it would be a meaningful expansion to Redboxas business model, and one that puts it in even fiercer competition with its crimson colleague, Netflix.

The reason itas looking online is because it has been so successful offline. It did that by being comfortably innovative, offering something new without ripping the rug out from under the way consumers already rented DVDs. There were four elements to the old way of doing things: 1) Renting a movie was an impulse decision, 2) a real person checked you out, 3) you got to take a real disc (or tape) home, and 4) you had to remember to bring the disc back by a certain time. The On Demand services have retained only the first step. Netflix has held on to the third. Redbox, meanwhile, has held on to three. All but the real, live person have been retained. And on top of that, Redbox threw in budget prices. Renting a DVD usually costs $1 a day.

This gradualism has paid off handsomely. In 2005, supermarket-kiosk magnate Coinstar (CSTR) bought part of the company for $20 million. Four years later, it bought the rest for $176 million. It was worth the money. Redbox is growing faster than Robin Williams in Jack. In 2009, 8,700 new kiosks were spread out across the country. Pre-existing kiosks rented $105 million more in DVDs in 2009 than they did in 2008. Coinstar took in $385 million more from DVD rentals in 2009 than in 2008 (aided, no doubt, by its full purchase of Redbox). And that extra revenue brought in more profit, too: $56 million more from DVD operations. Redbox has become by far Coinstaras biggest business. The companyas namesakeathose machines you dump your coin jars into at the supermaketanow pales in comparison, bringing in one-third of the revenue that Redbox does.

So, if things are going so well, why would Redbox turn its attention online? If it does begin to stream movies, it is going to be entering a marketplace brimming with retailers new and old. Amazon (AMZN), Apple (AAPL), and smaller upstarts allow users to rent movies a la carte. Netflix already has a streaming service on nearly every Internet-enabled device known to man. Hulu lets you watch (an obscure selection of) movies online, for free, with some ad interruptions. For these guysaNetflix includedathe online plans have to work or else theyare screwed.

But Redbox isnat nearly as desperate. It already knows it can survive as the country moves more toward online video. Otherwise its kiosk business wouldnat be thriving. But for-profit companies like to sniff for more profit. Thus it has to at least explore the online option; not doing so would be irresponsible. There is money to be made online, especially when video is paid for by the customer, not advertising. Also, getting into video streaming is a nice hedge in case online video becomes wildly more popular than it is now.

But that doesnat mean itas the right move for Redbox. At first glance, a streaming Redbox would be more in competition with Amazon and iTunes than with Netflix. But Redbox would likely be forced/able to undercut their prices because of its existing business model. Itas hard to ask customers to spend more money for something online than they would at the store down the street. The same logic applies to the local kiosk. But Redbox may not be able to afford to do that. To make online streaming happen, Redbox would likely have to renegotiate its contracts with the studios to include streaming rights. (I asked a Redbox spokesman whether this is true, but he declined to comment.) And acquiring those rights is expensive; on new releases, the number is likely more than the $1 Redbox charges at its kiosks. At first, it may have to run the online business at a loss to get the momentum going and hope that acquisition prices go down so it doesnat have to increase rental prices.

The low prices Redbox will likely charge mean itas really competing with Netflix, not Amazon, Apple, et al. But Netflixas subscription model is much pricier than Redboxas $1 a la carte strategy. (Assuming Netflix users donat stream eight movies a month.) Online, Netflix is better situated to reap profit, especially as customers ask it to stream more movies and send fewer DVDs.

Thus far, both Redbox and Netflix have been able to exist in the world of actual discs. (Netflixas own revenue has steadily risen every year for the last five.) And similar to their offline offerings, both companies would provide different services online. Redbox would go after the impulse buyer who favors more big-budget fare. Netflix would cater to the person who wants a deep library of meaningful, arty classics. Itas essentially Avatar vs. The Hurt Locker all over again. But like Avatar, Redboxas magic may not be as impressive online.