After being rumored in recent weeks, Amazon.com took the wraps off its revamped Instant Video service, which promises to go head-to-head with reigning streaming champs Netflix and Hulu Plus. But is the new offering worth your hard-earned dollars?

Amazon’s Instant Video (formerly Video on Demand) service has historically aimed at the traditional options for either buying or renting movies and television show episodes, but apparently the e-tailer sees the writing on the wall, with rivals such as Netflix and Hulu both offering “all you can eat” monthly streaming packages.

Now Amazon wants to carve out a hunk of that all you can eat streaming buffet for themselves, officially launching Amazon Instant Video on Tuesday with 5,000 unlimited, commercial-free choices -- and for millions of Amazon’s most loyal customers, it won’t cost a dime more.

For everyone else, the new service is actually a little cheaper on an annual basis than the competition. Here’s a quick look at what the service is, how it works and whether it’s worth adding to your entertainment options.

Free For (Most) Prime Members

For millions of Amazon customers, the Instant Video service is a no-brainer, since it’s an added free benefit to your existing service. How can that be? Amazon has made the streaming video service a perk for Amazon Prime members.

If you haven’t heard of it before, Amazon Prime is a service offering free two-day shipping on most everything sold by Amazon (and an increasing number of Amazon partners as well). The service costs $79 per year and also allows for $3.99 next-day shipping upgrades, all with no minimum purchase. That means you can order a $2 cable and get it delivered to your house in two business days with free shipping.

Now, Amazon is adding Instant Videos to the Prime roster at no additional cost -- assuming that you’re a paid Prime member, that is. Amazon offers a few different “free” Prime programs such as Amazon Mom, where parents can sign up for discounts on diapers and other baby items, adding a month of free Prime shipping benefits for each item over $25 they buy, maxing out at a year’s worth of free shipping. Likewise, the company also offers free Prime benefits to college students as well.

Unfortunately, these non-paid “Prime lite” programs don’t qualify for the Instant Video service, which Amazon will let you know about upon visiting the page for an eligible video title. Instead, you’ll be given the option to upgrade to the paid $79 per year Amazon Prime, while keeping some benefits, including those baby subscription discounts. (However, the paid upgrade will toss out your accumulated free months of Prime shipping, so Amazon Mom members may want to hold off until their free months have lapsed.)

You also can’t share your Instant Videos benefit with the rest of the family -- while a Prime membership allows up to five family members to take advantage of free two-day shipping from your account, the same cannot be said of video streaming, at least for now.

Is It Worth It?

Let’s put it this way: If you already buy a lot of stuff on Amazon.com, you should really join Amazon Prime. Maybe we’re just impatient, but the lure of free two-day shipping (with the option to upgrade to overnight for cheap if necessary) is just too tempting, and the service practically pays for itself at Christmas time assuming you buy gifts for family and friends from the e-tailer.

On a purely financial basis, Amazon Instant Videos is a bit of a bargain compared to Netflix or Hulu Plus, both of which cost $7.99 per month for unlimited streaming. That adds up to just under $96 a year, or $17 more than an annual Amazon Prime membership. Assuming that Instant Videos has content you’re interested in, you might find the service a better bargain, with the added benefit of free two-day shipping for physical orders from the website tipping the cart, so to speak.

Speaking of content, Amazon is launching Instant Videos with 5,000 movies and TV shows -- ironically, that’s about the same number of titles that Netflix stocked on their virtual shelves when they launched their own streaming service a few years ago, which was frequently panned for being made up of mostly older catalog content.

After hitting a peak of 20,000 titles a year or so ago, Netflix has since trimmed some of the fat (or rather, some of the choices) and now offers something closer to 13,000 titles at this writing -- shedding their past as a DVD-by-mail service in an effort to lure in more premium content from Hollywood studios and television networks.

That effort hasn’t totally paid off yet, but a $7.99 per month streaming-only package appears to have succeeded in luring new customers just the same. The trick for Amazon will be to similarly beef up their catalog, some of which is already available from Netflix.

Instant Videos At A Glance

Once you’ve made the decision to hop on board the Amazon Instant Video wagon, the rest is simple -- Amazon’s website recognizes your Prime membership (assuming you’re signed in with cookies enabled on your Mac or PC browser), and eligible videos show up with a small Prime logo under the title, much in the same way that they do on physical products.

In addition to the Prime logo, you’ll see three options for watching eligible movies or TV shows: One price for buying, another for renting and that magic $0.00 for Prime members. Amazon certainly knows what they’re doing here, because everyone likes the feeling of getting something for “free.”

Selecting the artwork or title for a Prime title, you’ll now see a big green “Watch now” button next to details about the movie. Click it and your selection begins to play, with options available for pause/play and volume, a connection speed indicator and the ability to pop the video out into its own window or go full screen. There’s also a scroll bar across the bottom of the window to scrub through the video, and all of these controls vanish after a moment of mouse inactivity.

Amazon On Your Television

For most of us, the real benefit to Amazon Instant Videos is the ability to watch it on our television screens. Thankfully, Amazon hasn’t tried to neuter the new streaming offering by limiting it to playback only on Mac or PC computers (as Hulu did for so many years) -- the entire Instant Videos catalog is available on “nearly 200 models of Internet connected TVs, Blu-ray players and set-top boxes.”

Among those set-top boxes is the popular Roku series (including the original model), making the diminutive sub-$100 devices a powerhouse of entertainment since Netflix and Hulu Plus are also available there, as well as a gaggle of less popular choices that can be added via the Roku Channel Store (many for free). Other devices include the Google TV-enabled Logitech Revue, several models of TiVo digital video recorders and the Sony Bravia Internet Video Link box.

With Amazon already built into so many current HDTVs and Blu-ray players, it’s a safe bet that your recent home theatre purchase can already take advantage of Instant Videos without having to make a new purchase, making the service an even better value.

Where Instant Videos Aren’t

Unfortunately, the most glaring exception for Amazon Instant Video viewing is with Apple’s portable iOS devices -- as of yet, there’s no app for playing content rented or purchased from Amazon, which is mostly Adobe Flash-based to begin with.

Such an app probably made less sense with the previous Video on Demand service, but something tells us that Amazon is likely hard at work on a universal iOS app that will rectify the situation and enable the iPad, iPhone and iPod touch to stream Instant Videos to our favorite portables. But don’t feel bad -- Amazon’s videos don’t appear on Android or other mobile platforms yet, either.

All in all, Amazon is off to a good start with Instant Video. It’s a nice perk for existing Prime members, and once the catalog beefs up a little more, it could be a good incentive to lure streaming content viewers into taking advantage of the other benefits offered by the service.

But more important than that, Amazon Instant Video puts some heat on the streaming behemoth known as Netflix. Amazon has some deep pockets, and with Hollywood studios nervous about how fast Netflix has grown in such a short time, they might be more apt in the future to offer fresher content to Amazon first -- and that’s a win-win for competition, any way you slice it.

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