The headlines got it wrong. 

"Blockbuster, Netflix drop after Apple movie-rental offering," went Marketwatch.

"iTunes rental news whacks Netflix stock," offered

You'd think that Netflix (Nasdaq: NFLX) and Blockbuster (NYSE: BBI) had just gone through a few bloody rounds in the ring against both Rocky Balboa and Apollo Creed. In reality, the media was simply reacting to old news. We already knew that Apple (Nasdaq: AAPL) would announce a digital movie rental service through iTunes. News Corp. (NYSE: NWS) leaked the story last month.

Remember two things here, Fools. First, yesterday was a brutal day in the market; you could have thrown darts at the ticker tape and hit roughed-up equities. Second, while Netflix shareholders suffered a 3% hit (in line with the 2.5% decline of the Nasdaq Composite), Apple's stock surrendered 5% of its value. Blockbuster suffered the nastiest hit of all, but there's a brain-freeze blizzard weighing down that particular company at present.

So why didn't anyone drum up more accurate headlines?

  • Blockbuster, Netflix, and Apple drop after Apple movie-rental offering
  • iTunes rental news whacks Apple stock
  • Netflix perhaps not fated to die by Apple's hand, actually

More strings attached than a bowl of spaghetti
Weighing Apple's iTunes movie rental service doesn't make it sound like much of a Netflix killer. Indeed, my Foolish colleague, Anders Bylund, believes that if anyone should worry, it's (Nasdaq: AMZN). Did anyone hear Steve Jobs yesterday?

  • New releases will be priced at $3.99, with older catalog titles available at $2.99. If you want high-def quality, you'll pay a buck more. In other words, it can cost you as much as $5 for an HD rental. Not only does Netflix offer free streaming of its limited online catalog, but if you go through more than three Apple rentals in a month, the Netflix smorgasbord is cheaper. Also, Netflix doesn't charge more for Blu-ray and HD-DVD rentals.
  • The term "new release" is relative, because Apple will start renting DVD releases 30 days after they hit the shelves at Blockbuster, Netflix, and retail stores. If you don't think that's a big deal, ask yourself why the older "new release" DVDs always seem to be in stock at your corner Blockbuster? Also, consider that movie studios actively promote the retail release of DVDs only in the days leading up to and shortly after the actual release.
  • The Apple rentals expire 24 hours after you start viewing them. Does anyone else remember the sad fate of disposable DVDs? This is different, of course, but it emphasizes the attractive value proposition offered by more flexible providers like Netflix and Blockbuster.

Besides, Amazon has been offering digital rentals through Unbox for a year now, and it hasn't exactly dented the market. Even with Amazon offering direct delivery to Web-enabled TiVo (Nasdaq: TIVO) owners -- and Apple's new lower-priced $229 Apple TV box serving as a more convenient conduit for its own home-theater delivery -- most consumers won't spring for the Apple TV or have their computers hooked up to their television sets. In other words, Apple's foray is more of a personal rental than the family-driven service that Netflix and Blockbuster market to consumers.

He who whacks last, whacks best
So who's whacking who here? Netflix announced free streaming earlier this week, actually tripping up the momentum of Apple's big news. Even if Apple's library will eventually surpass what Netflix can deliver on demand, it's hard to beat free. (Yes, I realize that Netflix has dropped the ball by not making its free streaming service available on Macs, but nobody's perfect.)

One can't dismiss the Apple threat entirely. The company has sold 7 million digital copies of movies since its iTunes store began peddling films. Digital rentals will obviously appeal to those who are willing to see a film in a single day, thus saving some serious coin on an outright purchase.

However, Apple has done nothing but expand the markets it's entered. If a company isn't braced for the digitally-delivered future -- and both Netflix and Blockbuster have done their best to stay ahead of that curved sickle -- it probably won't survive anyway.

In short, evolution can whack the conventional without taking out the players willing to evolve. Call off the grim reaper as a headline writer. Please.