Faced with increased competition from Blockbuster Inc. (NYSE: BBI) and other online download movie distributors like Amazon.com Inc.'s (NASDAQ: AMZN) Unbox service, Netflix Inc. (NASDAQ: NFLX) has said that is lowering the monthly price of two of its most popular DVD rental subscriptions. If a customer keeps three DVDs rented at a time, the price will now be $16.99 per month, with $8.99 as the cost for a single DVD rented out at any given time. Both plans were previously $1 higher in price.

Will this cause more customer loyalty among the online DVD rental faithful? I'm not sure a single dollar is what is needed here as anybody can compete on price. Can Netflix really absorb these price cuts, anyway? These two plans, which are used by a majority of the company's 6.8 million subscribers, will have an immediate impact on Netflix's revenue starting today. As always with price cuts, the strategy will need to make up the loss in revenue with more revenue coming from subscriptions (new or existing). Netflix will really need to recruit new customers. Not to mention these are not new pricing schemes -- competitor Blockbuster already has them.

What Netflix may need is some kind of other competitive advantage. How will Netflix differentiate itself? It must find an angle if it wants to increase that all-important subscriber rank. With NFLX shares down 24% this year and indicating down over 8% in premarket trading this morning (9:00 a.m.), this may be the most important decision it makes all year.

Netflix also reports Q2 numbers today, so this subscription announcement was probably carefully planned timing-wise (Friday) although it didn't seem to soothe shareholder fear. The competition is not slowing down a bit.