There's a new digital smorgasbord in town. (Nasdaq: AMZN) is finally rolling out its video-streaming service for Prime members at no additional cost. The leading online retailer is offering more than 5,000 titles of television shows and movies to its "millions" of customers that are already paying $79 a year to receive free two-day shipping and cheap overnight deliveries.

Obviously 5,000 is a fraction of the tens of thousands of streaming titles available through Netflix (Nasdaq: NFLX), but the flick flicker has been building up its digital catalog since it launched in 2007 with a mere 1,000 titles.

Amazon Prime's streaming selection is only a fraction of the 90,000 options that Amazon Instant Video offers for a la carte rentals or purchase, but it's a brilliant move nonetheless. As Prime members take advantage of the new offering to catch the original Girl with the Dragon Tattoo trilogy, or episodes of Farscape and Arthur, those that never bothered to set up their home theaters for Amazon-ian streams will now be more likely to consider the piecemeal rentals for fresher content.

Contrary to what cable providers and premium movie channels may have you believe, Amazon and Coinstar's (Nasdaq: CSTR) Redbox have always been the best positioned companies to take on Netflix and its 20 million subscribers.

Since no streaming service will ever be complete, there isn't a potential Netflix killer that lacks physical distribution. Sorry, Hulu, it's true. Coinstar can rent a limited number of new discs through its Redbox kiosks, but has been shockingly slow-footed in digital. Amazon can sell cheap DVDs, shipped for free in two days through Prime.

Netflix is trading lower this morning on the news, but the real losers here may very well be the studios. If they were worried that the value of their content was being diminished by folks paying as little as $10 a month through Netflix for unlimited streams and DVDs, imagine how they'll feel about Amazon essentially giving it away to its most loyal customers. If Amazon can milk more premium downloads -- and it should -- the sting won't be so bad, but the perceived value of streaming content has hit rock bottom, folks.

Amazon still has an uphill battle here. Its streams are available on several devices, but not enough. Web-tethered flat screen and select Blu-ray players can rub elbows with Amazon's streams. Roku, TiVo (Nasdaq: TIVO), and Google's (Nasdaq: GOOG) Google TV set-tops are also on board. The problem is that all three of those set-top boxes combined have a smaller ownership base than the smaller of the three video game consoles -- and Netflix streams on Wii, PS3, and Microsoft (Nasdaq: MSFT) Xbox systems. Netflix also streams on the leading smartphones and tablets. In short, Amazon has a lot of hands to shake if it's serious about making this more than a niche service.

The knee-jerk cynical reaction is to wonder how badly Amazon will eat into Netflix's momentum. I would argue that Amazon's entry will only further educate the market and encourage the cord cutting that's plaguing the costly cable providers.

Things are about to get interesting here.

Will Amazon's new service kill Netflix? Share your thoughts in the comment box at the bottom of this queue.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.