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) -- Hulu is issuing a new attack on


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, lowering its subscription by $2.

The Internet video company, which is backed by

General Electric

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, NBC Universal,

Walt Disney

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News Corp.

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and private-equity firm Providence Equity Partners, is cutting prices on its Hulu Plus service to $7.99 from $9.99, making it $1 less than Netflix's cheapest subscription.

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The latest move by Hulu is just another sign of the building competition Netflix faces in the movie rental market. While Netflix has all but obliterated the brick-and-mortar movie business, with


filing for bankruptcy back in September, and

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liquidating its assets, the streaming business is still up for grabs.


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, owner of Redbox DVD kiosks, is currently searching for a partner to enter the streaming market, and


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are all vying for a piece of the business.

It's also suspected that Hulu is considering an initial public offering that could raise as much as $300 million, and the company has been valued at about $2 billion.

Thus far, this competition doesn't seem to have eaten away at Netflix's growth. In its third-quarter, the company saw its subscriber base grow by 1.9 million, bringing its total to 16.9 million new users. This is a 90% surge from a little over 1 million new users in the second quarter, and marks the fourth consecutive quarter Netflix gained more than 1 million new subscribers.

Netflix has made no qualms about admitting its turning from a DVD-by-mail company into a streaming business. The problem is that while it cornered the DVD-by-mail business, it's questionable if it will hold the same dominance in streaming.

--Written by Jeanine Poggi in New York.

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Jeanine Poggi


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