DALLAS (AP) Blockbuster Inc. is offering lower-priced plans for online movie rentals as it competes with Netflix Inc. in a market that some analysts believe could grow more than 40 percent this year.
Blockbuster said Tuesday it would cut prices $1 a month for customers who order movies only online and not at stores. Only a month ago, Blockbuster's CEO talked about raising prices.
Analysts said Netflix could be forced to drop prices, which would reduce its profits.
Shares of Netflix tumbled $1.85, or 8.4 percent, to $20.08, while Blockbuster shares slipped 12 cents, or 3 percent, to $3.95.
Blockbuster said it would offer a plan letting customers place online orders to rent three movies at a time for $16.99, a buck cheaper than its most popular offering, called "Total Access." The movies are mailed to the customer.
The difference is that customers on the cheaper plan, called "Blockbuster by Mail," won't get a free rental by returning DVDs to a store instead of mailing them back. They will, however, get a coupon for one free in-store rental per month.
Blockbuster said it would offer more limited plans, such as two movies a month for $4.99 per month.
Netflix charges $17.99 for a three-out at one time plan, and it has begun throwing in movies streamed over the Internet for customers with high-speed access and a Windows-based computer. It also has a $4.99 plan for up to two rentals per month.