Today, access to its streaming video service comes bundled with Amazon Prime. But some rumors have emerged lately, suggesting that Amazon could unbundle the service and offer it as a standalone competitor to Netflix or Hulu Plus. That includes a mention from Netflix CEO Reed Hastings, who wrote in a letter to shareholders that he expects Amazon to introduce the service and price it below Netflix’s own offering.

But Brad Beale, Head of Digital Video Content Acquisition at Amazon, said in an interview Wednesday that the company is unlikely to break out the video subscription offering anytime soon. “The bundle of benefits that come with Amazon Prime make perfect sense to offer to customers,” Beale said. “The way that Prime Instant Video is offered today — we’re going to continue that approach at least into the near future.”

Even before adding the video component, Beale said that Prime was an incredible value. The offering provides free, two-day shipping to customers who pay an annual $79 subscription. We’ve believed for a while that adding video could entice some customers to sign up for Amazon Prime who might otherwise not have — and once they’ve paid the annual subscription fee, they’re likely to take advantage of the free shipping. In that sense, video could be seen as a loss leader for driving more physical retail sales.

There’s also the fact that having a free subscription service could help boost transactional sales through Amazon’s VOD and electronic sell-through offering. While Prime Instant Video has 15,000 titles for free viewing, it doesn’t have many of the latest new release films or in-season TV episodes. For newer content, Amazon offers more than 100,000 titles for rental or purchase. So an Amazon user who got hooked on older seasons of Downton Abbey or Sons of Anarchy on the free service might convert to being a paid user to watch the current seasons of those shows.

As Amazon adds content, it’s also looking to boost awareness of what’s available on the service. That includes placement of a letter from Amazon CEO Jeff Bezos on the site’s homepage, letting the millions of users who stop by every day know what new content is available from Amazon Prime. That kind of promotion is driving awareness and usage, Beale told me. As more customers learn what’s available, and as Amazon continues to improve the offering with even more content, he expects customer adoption to grow even more.

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As part of its content acquisition initiative, Amazon announced last week that it added 2,000 new videos from CBS . The company followed that up Thursday with an additional 1,000 videos from NBC Universal . Those deals will greatly enhance its video library by boosting the amount of content available through its subscription streaming video service by 50 percent, from about 6,000 titles to 9,000 in just the past week.

The NBC Universal deal, like the CBS one that came before it, mostly focuses on long-tail content, including older movies. Films like Eternal Sunshine of the Spotless Mind, Gosford Park and Elizabeth will now be available for Amazon Prime customers. And continuing the company’s focus on kids’ content like Sesame Street, the company has also added movies like Babe and Jetsons: The Movie.

In addition, Amazon has also bought PushButton, a firm that specializes in building connected TV apps. PushButton built apps for European-based streaming player LoveFilm, which Amazon acquired earlier this year. Those apps were used by LoveFilm to reach consumers on the Sony PlayStation 3, Sony Bravia TVs and Samsung Smart TVs. Amazon Prime Instant Videos has a somewhat limited reach in the connected TV space now — at least, is available on more than 300 connected devices, compared to the 250-plus devices that Netflix is available on and the 300-plus that Vudu claims to work on. But with PushButton, it could quickly change that to become even more competitive in the connected device market.

With an expanded content library and a key asset acquired to help it play in the consumer electronics market, we could see Amazon become much more aggressive in its pursuit of Netflix. And it couldn’t have come at a better time: With Netflix customer approval at what seems like an all-time low, Amazon Prime could have a real opportunity to win over some of its customers with a slightly cheaper annual subscription that also includes free shipping.

Update: Amazon Prime Instant Videos is on more connected devices than we thought. Amazon claims availability on 300 connected TVs and other devices.

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But with the official launch of a new streaming service introduced by deep-pocketed Amazon, what will this mean for Netflix, which has a low-cost streaming subscription service of its own? Probably not much, for a couple of reasons.

It’s Not That Good of a Value

Some will compare Amazon’s pricing at $79 a year (or about $6.50 a month) to Netflix’s monthly streaming subscription pricing, which is currently $7.99 a month or about $86 $96 a year. And while Amazon’s pricing is generally somewhat cheaper — and comes with the added bonus of free, two-day shipping — the service has only 5,000 titles, just a quarter of the 20,000 movies and TV shows that Netflix boasts as part of its streaming service. Plus, many of those titles — include the Stieg Larson Millennium Trilogy movies, documentaries like Man On Wire and Food Inc. and classics like One Flew Over the Cuckoo’s Nest — are also available to Netflix subscribers. In other words, don’t expect Netflix junkies to jump ship just to save a few bucks a year.

Amazon Isn’t Everywhere — Yet

Amazon Prime Instant videos is launching on (almost) all the same connected devices its video-on-demand service is already on, which include Google TV products from Sony and Logitech, connected devices from Panasonic, Samsung and Vizio, as wells as Roku broadband set-top boxes. That’s not bad for a streaming service at launch, but it still pales in comparison to the number of connected devices Netflix streaming is available on. Amazon Prime also don’t have support for a number of mobile devices — like the iPad, iPhone and Windows Phone 7 — that Netflix is already on.

We’ve Seen This Movie Before

Netflix was first to market in the DVD-by-mail space, giving it a pretty wide lead over other rental stores. But when Blockbuster, then the leading video rental company on the market, introduced its DVD-by-mail service to go up against the upstart, many thought Netflix was toast. While we don’t expect Amazon to suffer the same fate as Blockbuster, we also think it’s unlikely that Amazon will be able to unseat Netflix as the #1 streaming subscription service anytime soon.

Prime Instant Videos — A Nice Feature, but Not a Netflix killer

We’ve said it before and we’ll say it again: The Prime Instant Video service will be a nice value-add for Amazon customers, and it will likely increase the number of sales in other departments. In some ways, Amazon is taking the opposite approach that Netflix is: While Netflix is offering streaming as a way to reduce its spending on postage and improve margins, Amazon seems to be using the Prime Instant Videos offering as an incentive to sign up for its free shipping and buy more stuff. But until we see Amazon’s streaming service get more video titles or land on more devices, we’re skeptical the service will cause a mass exodus of Netflix subs.

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