Will Amazon's Video Streaming Service Hurt Netflix?

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Amazon recently announced a video streaming service available for free to their Amazon Prime subscribers. From what we have heard in the media, Amazon will end up offering a competitive service to Netflix. We all know that Netflix has recently moved most of their infrastructure to Amazon Web Services. In this post, I will briefly discuss if this move by Amazon will hurt Netflix in any way. I will also touch upon the larger concept of trusting your business on a third party provider who could end up being your competitor.

The Problem

When Amazon announced the new video streaming service, cloud pundits raised some valid questions on whether Amazon will tweak the QoS of their cloud infrastructure to help their own service over Netflix. Clearly, in a highly competitive environment like what exists between Netflix and Amazon, this is a realistic possibility. Remeber, in spite of the openness we tout in the cloud world, the cost of moving the infrastructure away from Amazon will be prohibitive for Netflix. Will Amazon play dirty games to kick a competitor away from the market or will it play straight and protect their booming cloud business.

Amazon’s response and my POV

As soon as this discussion came out among #Clouderati (a loose group of cloud practitioners, vendors, pundits on Twitter), Amazon CTO, Werner Vogels, jumped in immediately and clarified that Amazon has no such plans and he even highlighted that any such attempts will be shortsighted move and doesn’t bode well for the longevity of both Amazon Web Services and Amazon’s brand itself. He pointed out to how Amazon is already living in peace with competing third party merchants on their ecommerce platform. He even highlighted the fact that Amazon has a history of cannibalizing their own business to support a customer oriented view.

I agree with Werner’s arguments completely. Some of my thoughts on this development are:

Amazon is very smart to not cannibalize their larger brand for short term gains
Netflix is not dumb to consider such possibilities before they decided to put their entire business on Amazon infrastructure
More importantly, regulators are not blind. Any anti-competitive measure will not sit well with regulators and Amazon knows it pretty well

However, this does raise a very important question which every business planning to move their infrastructure to a third party cloud provider should consider. Are they willing to trust the cloud provider not to poach into their business? Do they have enough protection through their SLAs? Depending on the nature of the business, it is important that due diligence is paid while evaluating the risks.