Blockbuster, the largest U.S. video rental chain, said it is cutting the subscription price for its online rental service by $2.50 to $14.99 a month plus tax effective immediately, guaranteed through January 2006.

The move came as Blockbuster grapples with growing competition from online rental services operated by Netflix and giant discounter Wal-Mart Stores.

Netflix charges $17.99 a month for online rental subscription, while Wal-Mart charges $17.36 per month, according to the companies' Web sites.

Blockbuster's monthly subscription entitles customers to unlimited rentals, three movies out at a time, no due dates, no late fees and postage included. Subscribers also receive two free in-store movie or game rentals a month. Its competitors' services have similar conditions.

Blockbuster said that starting in mid-January, its online unit will have 23 distribution centers, more than doubling its capacity from August 2004 when it launched the service.

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