The plastic bag of DVDs Steve Dines carried out of the Shadyside Blockbuster yesterday spoke volumes about the demise of the big-time rental business. That's because Mr. Dines was there buying discs on the cheap, as the chain tries to sell its excess inventory.

"I don't ever rent anymore," said the 53-year-old Squirrel Hill resident. "I'm using the competition [that Blockbuster faces] to my advantage, watching the DVD charges come down and down in price."

It's just another reason why Blockbuster, once the innovator in the video rental business, is struggling to find a new way to remain relevant with customers, from lowering late fees to offering mail-order rentals. Yesterday, Blockbuster Inc. took another major step in its ongoing makeover by striking a deal to buy the digital-downloading service Movielink. The service, started by five Hollywood movie studios in 2002, has a large catalog of films that it zaps digitally to customers over the Internet.

The purchase, for an undisclosed price, is the latest volley in Blockbuster's battle against Netflix, the leading online DVD-ordering service that launched its own downloading service earlier this year. With Movielink, Blockbuster hopes to pull ahead of Netflix in the emerging market for direct computer downloads of films, as opposed to the mail-order model Netflix pioneered.

Blockbuster also has an online mail-order service similar to Netflix's, called Total Access. While Total Access has about 3.6 million subscribers to Netflix's 6.7 million, it has been catching up, adding 600,000 subscribers in the April-June quarter, vs. an exodus of 55,000 subscribers from Netflix, its first quarterly decline since launching in 1999. Hoping to stem that tide, Netflix late last month cut monthly fees on its two most popular ordering services, matching the online fees Blockbuster charges.

Blockbuster still faces budget woes. Its total revenues dropped nearly 3 percent in the second quarter as it continued to close stores, including 217 Gamestation stores in May. Fiscal problems sent a local franchiser into bankruptcy last summer, leading to the shuttering of seven Pittsburgh-area stores.

Blockbuster said it plans to run Movielink as an independent service, but eventually make some of its content available through Blockbuster's Web site. The company expects to keep acquiring movie download businesses.

The move toward downloading movies directly to living rooms -- whether through home computers or cable television "on demand" services -- is clearly the wave of the future for corporate media companies. The success of digital media players such as the iPod and such computer video sites as YouTube have helped fuel the switch.

Ironically, the move to downloads and the Blockbuster vs. Netflix battles also seem to be helping some traditional mom-and-pop video stores, which for years have been battered by Blockbuster's success. The Dreaming Ant video store in Bloomfield recently opened a second branch in Oakland, and the decades-old Heads Together franchise in Squirrel Hill has thrived since moving early this year to a new location across Murray Avenue.

The key is the human touch, said Heads Together owner Dee Sias. Ordering DVDs on the Web cannot replace clerks who know customers and their tastes personally, she said, or the offbeat selection private stores offer. Her customers also want the ability to run into her shop, pick up a film instantly and watch it with their family in the living room.

"I love the Internet, it's incredible," Ms. Sias said, "but by the same ticket I have no desire to watch movies on my computer."