Feeling Fellini on short notice? Got a late-night itch for Lubitsch? Cinephiles know to bypass Blockbuster and beat it over to Bahman's. Film scholar Bahman Maghsoudlou operates what has been recognized as one of the best video stores in Manhattan, in the entire country, even in the world. His International Film and Video Center won the Post Plus survey handily. An astonishing selection makes the East Side video emporium the place to go for hard-to-find foreign, independent and classic rentals.

You can get Hollywood movies there, too…but Maghsoudlou wonders why you'd want to do that. "I am not trying to compete with that Blockbuster two blocks away from me," Maghsoudlou sniffs. "They have garbage. We are dealing with film as art."

That may be, but the fact is, a resurgent Blockbuster is beating the pants off video outlets such as Maghsoudlou's – and is leading a revolution in the rental business that threatens to mothball the remaining independently owned shops. Blockbuster spokeswoman Liz Greene says that the company doesn't intend to put small retailers out of business.

Blockbuster has poured millions of dollars into beefing up its back catalog, that is, everything that's not a new release – in response to customer complaints about poor selection. And Greene says the company has modified the offerings in each of its 4,000 stores (82 in Manhattan, with three more to open soon) to match the tastes of their particular neighborhood.

Blockbuster's biggest bone to video hounds is a guarantee that the most popular new releases, which accounted for more than half of all rentals at Blockbuster last year, will be on hand for all comers."You can count on it," Greene says. "And if they aren't there, we offer a rain check where you can get the same titles on the house the next time you come."

Maghsoudlou can't match that. He admits frankly that he'd be shattered if his modest store on First Avenue near 54th Street had to depend on the neighborhood trade for survival. "We would be closed within a month," he says, explaining that the International's extensive worldwide mail-order-video business keeps him operating.

Other indie rental shops aren't as lucky. About half of all video retail outlets are independently owned, down from an estimated 70 percent just a few years ago. Meanwhile Blockbuster has turned its slumping business around by instituting a deal with studios called revenue sharing, allowing Blockbuster to stock many more copies of a given title than before. Under the plan, studios make rental copies available to Blockbuster and other chains at drastically reduced prices in exchange for a greater share of the rental proceeds.

It's a great deal for consumers, who are far more likely to find what they're looking for at video stores than they were just two years ago. It's also good news for Blockbuster, because of its market domination. Blockbuster now commands nearly a third of the video market. And what a market it is: Nationally consumers spend $8.57 billion per year renting videos and $7.6 billion buying them, as compared to just $6.4 billion seeing movies in theaters.

Video renters, who can get the hottest titles on their first foray to the store, now are repaying Blockbuster with its highest customer-satisfaction rating ever. "The feeling is that this is the way industry has to recapture the marketplace, but also the way it has to protect its flank from electronic delivery," says Bruce Apar, editor-in-chief of Video Business magazine. "One of the biggest advantages cable or satellite has with their delivery service is there’s never a shortage of copies."

But good news for consumers and industry giants makes mom-and-pop video retailers quiver. Blockbuster, with its deal-making clout and domination of the marketplace, is undercutting the little guys – and, as they see it, cutting their throats.

A final indignity, from the indie point of view: Viacom-owned Blockbuster can afford to spend $160 million on an ad campaign promoting its new consumer-friendly policy. "My business is going down because there's a Blockbuster about five blocks away," complains Vincent Rosario of Paradise Video in Brooklyn. "I'm probably going to be out of business by the end of the year." But some industry experts say indie video outlets are more likely to survive here than elsewhere. Apar points out that the video industry is very neighborhood-based, which means more in a city like New York where many people don't use cars.

"In this city, three blocks is a long way," says Michael Mark, co-owner of two Couch Potato Video stores in Manhattan. "I have a Blockbuster store three blocks away, and it's in another neighborhood. I have people who come in here because they won't walk those three blocks." Experts say that the independents have to start aggressively distinguishing themselves from the chains. Specialization is one way. "Blockbuster will never have much of a collection of foreign films or domestic art-house stuff," says Tom Adams, a market analyst. "And the whole adult-video sector is something the independent stores will have for themselves for all eternity." As a policy Blockbuster does not carry films with NC-17 ratings.

Customer service is another area of competition. International Film and Video Center, for example, allows renters to reserve tapes for later pickup, and offers a free delivery service. The small staff is also extraordinarily well-educated in film history and can offer customers informed advice hard to come by in chain stores. "It's the little things that really add up to individual customer service, and understanding your immediate market," says Apar. "That’ll be necessary for survival."