Blockbuster Inc. (BBI) is cutting the cost of its monthly online rental service, the latest salvo in a price war with Netflix Inc. (NFLX) and Wal-Mart Stores Inc.(WMT).

Blockbuster, the largest movie-rental chain in the country, said Wednesday it was cutting the price of a monthly subscription to its online ordering, mail delivery service to $14.99 from $17.49

The Dallas-based company said it was also expanding its online inventory to 30,000 titles from 25,000.

For the $14.99 service, Blockbuster lets customers rent three movies at any one time with no due dates or late fees. A similar service from Wal-Mart costs $15.54 a month, and $17.99 at Netflix.

In October, Netflix announced it would cut its price $4 from $21.99 a month, prompting Blockbuster to go even lower, to $17.49. The price war spooked investors, who bid Netflix shares down 41 percent the day the cut was announced.

Both Blockbuster and Netflix say they are signing up more customers. Blockbuster said more than half its online customers are new to Blockbuster or had stopped patronizing its stores for at least six months.

Earlier this month, Blockbuster said it would eliminate late fees on games and movies as of Jan. 1.

Blockbuster fell 15 cents, or 1.6 percent, to $9.52 a share in late morning trading on the New York Stock Exchange (search).