UPDATED: Netflix Lowers Prices for DVD Rentals by $1 ... Again

Netflix just lowered its prices on the "three DVDs out at-a-time" plan again, taking it down a buck to $15.99 a month. Our jaws dropped as we saw the above notice in our inbox, because it was just three weeks ago when Netflix had lowered the price to $16.99. Hey, keep those price reductions coming, Netflix! Pretty soon, they'll be giving them away. We have a price war on our hands between Netflix and Blockbuster, folks, and it looks like we movie buffs will be the winners.

UPDATE: Chris Null from Yahoo! gets official word that this is happening for 6.7 million customers.

UPDATE 2: Despite its customer service rep saying otherwise, now Netflix PR says this price reduction is a "test for a small number of accounts." We're feeling lucky to be a part of this "small group," because two of us here at Gizmodo got the discount, one on the East Coast and the other in the Midwest. [Yahoo]

The burning question now is, will Blockbuster match this price reduction by Netflix? Blockbuster now offers three DVDs at a time for $16.99 through the mail only, or $17.99 to get your movies through the mail and then get free in-store exchanges. Incidentally, the company just crippled that "total access" plan, limiting it to five free in-store exchanges a month with a charge of $1.99 each afterwards. That may be one of the first things to change back to the way it was before.

The next front in this war will be movie downloading, which just heated up with Blockbuster's August 8 acquisition of Movielink. That buy might give Blockbuster access to lots of content from the major studios, putting the onus on Netflix to improve its "Watch Now" service, which suffers from a paucity of selections.

How low can these prices go before the by-mail movie rental services are completely unprofitable? Will this be a situation like a gunfight where both participants shoot each other and die?