Blockbuster to cut prices for online DVD rentals

The video retailer retaliates after Netflix drops its own prices on DVD rentals.

Video retailer Blockbuster on Friday said it will lower the price of its online DVD rental service by 12.5 percent, undercutting a price cut launched by rival Netflix a day earlier.

Blockbuster Chief Executive John Antioco said the price cut for a monthly online subscription to $17.49 from $19.99 would become effective "the week after next." He said the move was in response to Netflix's announcement it would reduce its monthly online subscription fee to $17.99 from $21.99.

"We were growing our business at a very nice clip, but would not have elected to lower our prices. Having said that, we are determined that we are not going to be beaten from a price-value perspective," Antioco said.

Blockbuster, which operates nearly 9,000 retail stores worldwide, launched its online business in August. Wal-Mart Stores also has entered the arena, and on Thursday, Netflix said it sees Amazon.com entering too.

Amazon said it had been encouraged by customers to offer online DVD rentals but had nothing to announce.

Antioco said Blockbuster "takes all competition seriously" and said the company will offer a number of new in-store and online promotions such as free movie and video game rentals to further entice customers to stay with Blockbuster.

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