Prime will continue to cost $79 per year, and still includes unlimited two-day shipping and $3.99 one-day shipping on retail orders. Even if you never buy a single item from Amazon, the Prime video service will save you $17 over Netflix streaming on a yearly basis.

That’s not to say Amazon and Netflix are comparable. Amazon streaming is missing from a few key set-top boxes, including video game consoles and TiVo (TiVo supports Amazon video on demand but not the streaming service, for now at least). As for the iPhone and iPad, Prime support seems unlikely, especially with Apple’s new policy towards subscription services. On the bright side, the service should work on Roku, Google TV and nearly 200 connected Blu-ray players and TVs. Engadget’s Tim Stevens even got some videos running through the Flash player on his first-generation Droid phone.

The other big challenge for Amazon Prime will be content. It’s a much smaller library than Netflix’s 20,000-plus movies and shows, and if you pick through your Netflix queue, you’ll probably find a few great movies that aren’t available on Amazon (anecdotally, in my case: Wall Street and Being John Malkovich).

Television content is even less favorable for Amazon. NBC shows such as Parks & Recreation and Saturday Night Live are absent. So are ABC/Disney shows such as Lost and Grey’s Anatomy. Netflix has all of those shows and more thanks to expensive studio deals (the company reportedly paid $200 million for ABC/Disney content), and it’s hard to imagine Amazon catching up unless the Prime service becomes a huge success.

For now, it’s just icing on top of Amazon’s shipping service, and that’s fine. Anyone who wants to compete with Netflix will need some kind of hook to compensate for an inferior library and smaller list of supported set-top boxes. Amazon’s pairing of free shipping and streaming videos isn’t the most logical match, but at least it’s something different.

We’ve heard this story before, in a couple of rumors from last year, but over the weekend an Engadget reader reportedly spotted the streaming option while perusing Amazon’s on-demand video library. Amazon has also registered the web domain primeinstantvideos.com and several variants.

According to the tipster, Amazon may tie the streaming service to Amazon Prime, the retail program that provides unlimited two-day shipping for $79 per year. Subscribers would get access to roughly 5,000 videos in 480p resolution with no commercials, at no extra cost. This would undercut Netflix’s streaming plan by $17 per year.

Rumors aside, Amazon’s entrance into the market isn’t terribly surprising. Hollywood executives began grumbling last year that Netflix was becoming too powerful. Studios want to extract more money for streaming content, and competition could bring about bidding wars for exclusives and long-term agreements.

But competing with Netflix won’t be easy. As of last August, the company offered more than 20,000 streaming movies and TV shows, compared to the 5,000 that Amazon will reportedly offer. And Netflix is making big investments in television, recently spending $150 million to $200 million for reruns of Disney and ABC shows. Amazon will also have to find a way onto game consoles, set-top boxes and smartphones, on which Netflix is already well-established.

Both Amazon and Netflix will be under pressure to keep prices low while spending more money on content, and that brings up a unique challenge for Amazon: If the streaming service is tied to Amazon Prime, the company will have to deal with existing subscribers who may not be interested in the video component at all. I envision outraged customers if Amazon has to raise Prime prices to compete with Netflix.

All of this assumes, of course, that Amazon really is preparing a subscription video service, but it seems harder than ever to deny now.

According to Bilton’s sources, the company has already looked into producing MP3 players, portable electronics, and even an Amazon phone. The phone is probably the biggest stretch for them, but hasn’t been 100% ruled out just yet. Either way, the company’s moves are all about protecting its position in the digital content space. Guess they’re just not all about books anymore, eh?

As with all of its applications, Kindle for Android will include Whispersync — which synchronizes information including last page read, etc. across all Kindle applications and devices automatically.

Those wishing to use Kindle will need Android OS 1.6 or newer and an SD card. Specifically, Amazon has mentioned that the software would work on the Droid Incredible, Google Nexus One, HTC MyTouch, Motorola CLIQ, and Motorola Droid on a page announcing the launch of the application.

No specific details on availability have been announced, although a statement from the company says “this summer” — which could mean next month or September for all we know.

Not all books for Kindle include DRM — Amazon leaves it up to the publisher to decide whether or not they would like to protect their content. It is likely the company will rush to patch the hole opened by the hacker, although it was not immediately responding to requests for comment Wednesday.

The hack was developed as an entry to a contest on hacking.org.il, where participants were tasked with finding a way to open up the AZW format to allow it to be read on other devices. The hack took about eight days for Labba to complete. The hack is actually an application that is installed onto the device, which then converts the files to the mobi format. Be forwarned though that Amazon has apparently already pushed out code for the Kindle that breaks these scripts, although it is reported it does not auto-update the device.

The botnet was a Zeus bot (Zbot) variant. The Zeus trojan is a  program that criminals use to gather personal and financial data from its victims.

Hackers that create trojans such as Zeus are becoming increasingly organized and function like corporations, according to a security recent report published by Microsoft. That structure enables regular malware release schedules, and gives criminals the ability to exploit complex vulnerabilities in software–even as operating systems become more secure.

Law enforcement has made some progress toward shutting down the data centers that criminals use to host their infrastructure, but the crooks are seemingly one step ahead, and have now migrated to Web-based services. IDG reports that unnamed law enforcement officials have begun to worry that stolen credit cards could be used to purchase cloud computing services such as AWS.

That’s a given. I hope that cloud providers take action to discover malware on their server, and have the capacity to shut it down before serious damage can be done. They have a responsibility to do so.

PayPhrase won’t be limited to just the online retailer. It plans to offer the service to other retailers as well. So far DKNY, Jockey, Patagonia, Buy.com, J&R, and Car-Toys have signed on with the service. Other sites that use Checkout by Amazon would also be able to employ the PayPhrase service, it said.

The nation’s largest online retailer sees this as a big boon for the holidays, where speed is a benefit for shoppers with long Christmas lists.

Is Amazon on to something however with PayPhrase? I think so. Even online methods of payment like PayPal still require several steps to complete a transaction. This requires only two steps: entering the phrase, click, enter PIN, click, done. You can’t get much easier than that while still staying secure.

What remains to be seen however is whether Amazon can drum up more support for this platform. Besides itself, the only other partner with significant market share is Buy.com: that’s way too little reach. If it can manage to snag say two or three more big name partners, PayPhrase may become the next big thing in online payments.

An Amazon that owned Netflix would get the opportunity to market digital downloads to all those happy Netflix customers; a Netflix that was part of Amazon would have access to Amazon’s ambitious video-on-demand platform and content deals. It would probably leave both companies and their customers better off—and hey, it give Apple an iTunes Store competitor that was that much larger and stronger.

I’m just a customer of Amazon and Netflix, not a shareholder. But if mergers were voted on by shoppers, I’d give this one my stamp of approval. Even if it’s not really under discussion at the moment, it feels sort of inevitable…

Following in the footsteps of CDBaby, but with a crucial difference, TuneCore and Amazon will launch an on-demand CD printing service, Wired’s Eliot Van Buskirk reports. The musician pays $31 per year for printing, labeling and delivery of a 10-track CD. Amazon sells the CDs for $8.98 each and keeps 60 percent. The rest goes to the musician.

In terms of keeping a low barrier to entry, CDBaby and TuneCore’s services are fairly similar — I could break down the differences in price and process, but I’m sure things will change once the two companies start competing. The real distinction is the muscle TuneCore brings to the table. Buskirk notes that Trent Reznor, Keith Richards and Joan Jett are already clients of TuneCore for other digitial distribution services, and they’ll likely be itching for yet another way to escape the major labels. With TuneCore, they only have to sell nine CDs each to break a profit, and they keep all the rights to their music.

Not that online printing is without drawbacks for consumers: The immediacy of purchasing a CD in a store is absent, and so is the chance to own something with elaborate packaging, as TuneCore’s liner note options are a fairly standard set of sleeves and inserts. Buskirk also raises the issue of selling CDs at a concert, but I don’t see why the band itself couldn’t order a thousand copies and sell them for a premium at the show.

Paramount to all this nitty-gritty is the not-so-novel idea that the music business as a whole is decentralizing. The cleverest musicians, big and small, are finding ways to advertise and sell products without major labels. Meanwhile, entrepreneurs are capitalizing in spaces where the music industry was too big, dumb and slow to venture.

These monoliths will shrink, and companies like TuneCore will be the catalysts.

Update: So we’re all clear, TuneCore’s Peter Wells, who comments below, breaks the pricing down in an e-mail as 19.98 for a year of maintenance and storage of the physical CD, plus 99 cents per song, plus a flat fee of 99 cents to sell the album through Amazon, totalling roughly $31. An extra dollar distributes the song to iTunes as a digital download.