Netflix follows through on price-cut promise

Faced with growing competition, the DVD rent-by-mail service is reducing its monthly subscription fee.

Online movie renter Netflix cut its rental subscription fee on Monday, a step aimed at mitigating competition that has fueled concern about its future growth prospects.

Netflix, which first announced intentions to cut its $21.99 rental price on Oct. 14, said customers can now rent as many DVDs as they want for $17.99 per month.

There are no due dates, no late fees and no shipping charges, but customers are limited to three movies at a time.

Netflix, based in Los Gatos, Calif., pioneered online movie renting in 1999, but its business has come under pressure from rival copycat online rental services that have mushroomed to capitalize on the growing popularity of the DVD medium in home entertainment.

Netflix's biggest rivals are Blockbuster, the leading "brick-and-mortar" U.S. movie rental chain, and discounting heavyweight Wal-Mart Stores, which now also rents movies online.

But with more talk that Internet retailer Amazon may consider launching its own online movie rental service, analysts have said there could be more challenges ahead for both Netflix and Blockbuster.

Rental demand has been waning amid the increasing proliferation of cheap DVDs at retail stores and a shift by some consumers to watch movies via video-on-demand or pay-per-view services.

To take Netflix head-on, Blockbuster on Oct. 15 cut its online rental price to $17.49 from $19.99, fueling concerns about a price war that could strangle profit growth as competition escalates.

Story Copyright  © 2004 Reuters Limited.  All rights reserved.

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