In the context of competition, what best describes the threat Netflix posed to Blockbuster?

The correct answer highlights how Netflix represented a significant alternative to the traditional video rental experience offered by Blockbuster. This situation illustrates the concept of substitute products and services, where Netflix provided a different way for consumers to access movies and TV shows, primarily through a streaming model.

During its rise, Netflix’s offering gave customers the option to enjoy home entertainment without the need to visit a physical rental store, thus serving as a substitute for Blockbuster's services. This shift in consumer behavior, driven by the convenience of online streaming, was a major factor that threatened Blockbuster's market share and overall business model. As customers began to prefer the ease of watching content on-demand from home, the relevance of traditional brick-and-mortar rental stores diminished significantly.

In this context, rivalry among traditional competitors primarily pertains to direct competition between similar types of businesses, which wouldn't capture the nature of the threat from a fundamentally different service like Netflix. The threat of new market entrants relates to potential new players emerging in the industry but does not accurately describe the existing competition posed by Netflix against established players. Finally, bargaining power of customers refers to the ability of consumers to influence prices and negotiations, which is not the central theme of how Netflix disrupted Blockbuster's business model.