Blockbuster Inc (BBI), the No. 1 U.S. movie rental company, began offering free in-store rentals to subscribers of online rival Netflix Inc. (NFLX) on Tuesday as it tries to take market share from Netflix and reach its year-end subscriber goal.

Netflix subscribers can get one free rental at Blockbuster stores for each address label they bring in from their Netflix mailing envelopes.

The offer to Netflix subscribers, which runs until December 21, comes after Blockbuster began allowing subscribers to its own online rental service to swap DVDs they received in the mail at Blockbuster stores.

The program, called Total Access, highlights the main difference between the two competitive services: Blockbuster has stores where consumers can immediately satisfy a desire for a particular movie.

Netflix boasts overnight delivery of DVDs to most of its 5.7 million subscribers. Netflix said it will reach 6.3 million subscribers by year's end.

The two companies have spent hundreds of millions of dollars over the past two years trying to reach the growing online DVD rental market, which they believe numbers more than 20 million subscribers, as the in-store rental business contracts.

Netflix spokesman Steve Swasey said the company was confident it would continue to grow and add market share despite Blockbuster's larger size and aggressive promotions.

"I think most folks know that if you get something free you're getting what you pay for," Swasey said. "The very reason for online DVD rental is that you don't have to go to the store. It's the convenience, selection and value."

Blockbuster also has forecast to analysts that it will add about 500,000 subscribers in the current quarter, to reach its year-end goal of 2 million total subscribers.

Wedbush Morgan analyst Michael Pachter said he doubted the promotion would have much impact on the success of Total Access.

"This isn't about subscribers. Subscribers don't matter," he said. "What matters is that Blockbuster is not likely to ever lose another customer to Netflix (as a result of Total Access). Ultimately you look at value for your monthly fee."

Shares of Blockbuster were down 2.16 percent, or 12 cents, at $5.43 on the New York Stock Exchange. Shares of Netflix were down 0.8 percent, or 23 cents, at $28.70 on Nasdaq on Tuesday.