Netflix and Amazon: Quite the co-opetition case study

Summary:On the surface, the fact Netflix is moving its entire infrastructure to Amazon Web Services looks a bit nuts given the e-commerce giant competes on streaming video. But it's business as usual for these rivals and partners.

Netflix and Amazon are fierce rivals on streaming video. Netflix is also moving its entire technology infrastructure to Amazon Web Services. Netflix CEO Reed Hastings is Amazon's most visible infrastructure as a service customer. On another front, Amazon is making storage cheaper for Hastings while raising Netflix's content costs through competition elsewhere.

Simply put, the Netflix and Amazon relationship is complicated, nuanced and in some regards just plain weird. The Netflix-Amazon relationship also highlights why Amazon Web Services (AWS) is successful. At the AWS re:Invent conference this week in Las Vegas, the Netflix-Amazon relationship was on full display.

But to hear Amazon execs and Hastings talk there's nothing out of the ordinary.

Hastings noted AWS price cuts and thanked Andy Jassy, senior vice president of AWS on Wednesday. Hastings also said Netflix's entire infrastructure will run on AWS.

On Thursday, Amazon CEO Jeff Bezos said :

We put just as much care into Netflix on AWS as we do Amazon retail. We may compete on Prime instant video, but we bust our butts every day for Netflix on AWS. The whole point of what we are doing is to standardize that layer. Amazon retail gets the benefit of standardizing that layer.

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The importance of this Netflix relationship can't be overstated. The Netflix case studies and ongoing collaboration allow AWS to be an option for many of Amazon's competitors. If the Netflix and Amazon partnership seems odd to some folks it can't be worse than Best Buy using AWS. Retailers use AWS. E-commerce companies use AWS. A bevy of startups and large enterprises are using AWS.

Many of these customers also compete with Amazon. In other words, AWS rivals/customers put a lot of trust in Bezos and the gang to keep its IT infrastructure unit separate and stay that way. That goodwill may be AWS' secret sauce in many respects. Belief that AWS is independent can allow it to fend off competitors who are just as surprised as Bezos at the traction Amazon has with enterprises, government customers and education institutions.

What remains to be seen is whether AWS is dented by encroachment from a bevy of rivals such as Rackspace. Rackspace has made a point of trying to poach retail customers from AWS. The Rackspace argument : Why would you give business to a rival? So far, the argument hasn't worked.

Adam Selipsky, vice president of product marketing, sales, and product management at AWS, said rivals will give business to the company because it meets their IT needs.

This co-opetition is "not uncommon at all," said Selipsky. Ultimately retailers or any other customer base will stick with AWS if it delivers strong performance, a good pace of innovation, value and good customer support. If AWS didn't operate independently customers wouldn't use its services, he added. "The only way to build a healthy large cash flow generating business is to focus on servicing customers," he said. "We and customers are comfortable with the long-term state of affairs."

More re:Invent coverage:

Amazon CEO Bezos: AWS is lean manufacturing, Kindle Fire for IT  |  Amazon Web Services launches Data Pipeline, EC2 instances for analytics  |  Amazon's Vogels: Next-gen IT architectures need to be 'cost awar e' |  Amazon Web Services: Rackspace's OpenStack low on customers' radar  |  Amazon Web Services launches Redshift, datawarehousing as a service Amazon Web Services cuts S3 prices, knocks old guard rivals  |  BitYota launches, eyes data warehousing as a service  |  NetApp, Amazon Web Services set hybrid cloud storage pact

Topics: Cloud, Amazon, CXO, Storage

About

Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic. He was most recently Executive Editor of News and Blogs at ZDNet. Prior to that he was executive news editor at eWeek and news editor at Baseline. He also served as the East Coast news editor and finance editor at CN... Full Bio

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