Why Does Amazon Let Its Competitors Use AWS? (AMZN,NFLX)

Imagine having its biggest competitor will be under appreciation. It seems impossible, but Amazon.com Inc. (AMZN) is just this situation many times. Amazon Web Services retail e-commerce (AWS) has grown so much that it is by far the number one cloud service worldwide. The diversity of the Amazon and the omnipresence of AWS puts the company in an interesting position AWS is essential for a variety of competitors from Amazon. What exactly is the motivation of Amazon to allow this?

Possibility of Spin-Off

Amazon shareholders waited for decades for the company to make a profit and have been awarded several times in 2015. This benefit did not come from the operations of retail, but AWS. The market has rallied behind Amazon and increased his evaluation, so it became the most valuable retailer in America.

The Amazon business model has never been about the benefits. The company focuses exclusively on growth and the use of sales in the most efficient way possible, so that the company can expand to other commercial and service sectors. Proceeds from the share of e-commerce is used to run video and Amazon Prime revenue from AWS is not assigned to anything. (For related reading, see What is Amazon Web Services and why is it so successful?)

While cash reserves, management accumulate Amazon will start to feel the pressure from shareholders to declare a dividend. This is the last thing you want Jeff Bezos. Amazon return the money to shareholders makes everyone richer, but prevents future growth of the company. Instead, AWS can be cleaved-a measure that would allow applicants to have a dividend adopted quarterly revenue while allowing large investors Amazon have a growth-oriented company.

Amazon does not care

Moreover, Amazon will refuse to bow to pressure from shareholders and maintain AWS as a decision to generate income is used to increase business in e-commerce. In this situation, it seems that Amazon simply does not care what your competitors are doing. Amazon in the development and maintenance of a profitable AWS is fully focused on increasing revenue and not to excel in the market. Amazon management is determined that the best company will win and hopes that will survive the competition. The turnover of AWS will be used to expand the business to infinity, and competitors and customers is a part of doing business and fundraising.

There is also an argument to claim that the diversity of product offering Amazon is not to compete but to bring people to Amazon Prime. We know that increasing the number of initial subscribers is a key priority for the management of the Amazon and maybe products and ancillary services are offered as a membership benefits and nothing more, which enables AWS to provide resources for direct competitors without worrying that affects their clientele.

Destroy competition

Perhaps the most cynical theories of why Amazon allows its competitors use AWS is that there is a long-term plan in action. The most interesting is AWS competitor Netflix Inc. (NFLX). In 2010, Netflix has suffered a major fire in your data center that sent streaming company to seek an alternative. Since then, Netflix has moved its services anywhere, and AWS data flowing. It is estimated that Netflix accounted for 37% of Internet bandwidth downstream in March 2015.

Currently, Amazon can not afford to lose Netflix. Netflix is ​​a leading media revolution and both Netflix and Amazon Prime video anti cable companies to change the way we watch TV and we produce the media.

In ten years, however, when the major studios have moved or disappeared, Amazon Prime and Netflix video are probably the two strongest media providers in America. At that time, AWS can easily start Netflix servers. Of course, there are contracts in place and Netflix may continue, but once the issue made its way through the judicial system, the damage will be done. Currently, there is no alternative to AWS that is large enough to handle the traffic Neflix, and gives you a huge advantage of Amazon.

The same situation is repeated again and again-iTV (production company in the UK) is a client of AWS. Dropbox is competing with Amazon Cloud Drive. Lightinthebox.com is a major international retailer to work outside China. Lions Gate Entertainment Corp. (LGF) and Comcast Corp. (CMCSA) both rely on AWS. When is your recipe for AWS is not enough to compensate for the market share taking Amazon?

The Bottom Line

Amazon Web Services is a provider of tens of thousands of companies that compete with a wide range of companies from Amazon. Why Amazon allows these companies use AWS is under discussion, but it could be that these companies were established to fail, they are too focused on revenue, or AWS filée- start off. Whatever the reason may be, Amazon is in a position that other companies would be killed.