The distinctive blue and yellow ticket stub that serves as Blockbuster’s logo was once a symbol of the company’s brand power. Today, it reminds us just how quickly technology can render obsolete those that fail to keep with the times. Blockbuster, the world’s largest movie rental company, filed for Chapter 11 bankruptcy last Thursday. It was the resounding defeat of a company that finally admitted its inability to continue business without restructuring, amid increasing competition and large debts.

Perhaps the bankruptcy was inevitable. New entrants like Netflix came and revolutionized the video rental business model, introducing a mail- and Internet-based system. Omitting the need for a brick-and-mortar presence significantly reduced overhead costs. Furthermore, the convenience of selecting movies instantly and having them delivered within a business day immediately won subscribers. Blockbuster could only watch itself lose market share, as its own share price fell 95 percent from 2004 to 2009. During the same time period, Netflix’s stock increased ten-fold. The situation would only get worse, as more competitors — such as Coinstar and Apple’s iTunes — entered the fray.

It is not as if Blockbuster did not try. In order to compete with competitors such as Netflix and Coinstar, Blockbuster entered the mail- and Internet-based rental space. It began its kiosk business in a partnership with NCR in 2009. But these changes proved too late. During the second quarter of 2010, the company reported losses of more than $69 million, a number significantly worse than the low benchmark set in the same quarter in 2009 when the company lost more than $37 million.

During those same two quarters, Netflix reported profits of more than $43 million and $32 million, respectively. Blockbuster’s attempts to dig itself out of its hole only made the hole deeper; by the time it announced bankruptcy, its debt had ballooned to about $1 billion.

Change was expected with the start of a new decade. But how many people imagined that it would be the curtain call of the video rental chain business? Earlier this year, Hollywood Video, the second-largest video rental chain in the United States, saw its parent company Movie Gallery file for Chapter 11 bankruptcy in February. Three months later, the remnants of what was once Blockbuster’s biggest competitor announced liquidation in Chapter 7 bankruptcy. Like Blockbuster, Hollywood Video found itself unable to compete in the new competitive landscape.

Blockbuster’s bankruptcy filing marks the end of an era. It is difficult to believe now that the video rental giant’s successes lied in a business model that jumped on the forefront of new technology.

Founded in 1985, the company took advantage of the growing popularity of VHS video tapes, setting up stores that provided neighborhoods with a one-stop shop for home entertainment needs.

The catalog soon expanded to include video games and new media technology such as DVDs.

At the time, the business model seemed to be enduring: The high prices of new media made rentals an attractive alternative. Blockbuster did not need to innovate; the media industry would innovate for them.

Now, its plight is all the more ironic. A company that depended on new technology for its success finds itself doomed by even newer technology. The Internet makes it possible to download movies and video games in minutes. Websites such as YouTube allow users to stream directly from the Web. Online-based businesses such as Netflix not only allows for entire movies to be streamed online but also delivers DVDs and video games directly to homes within one business day. The competitive landscape changed completely during a span of a few years, and Blockbuster’s business continually found itself lagging.

The decline of another familiar major U.S. business may alarm some. True, Blockbuster’s bankruptcy will only add in the short term to the millions of people unemployed in the United STates today. But bankruptcy is not inherently bad. In the most successful form of capitalism, creative destruction will be prevalent. Obsolete business models will either be reinvented or scrapped, freeing resources for those who continue to succeed. Few would argue that firms such as Netflix have made home entertainment worse. And if Blockbuster can emerge from its restructuring stronger, then the world will be better for it, as well.