From Seeking Alpha:
Netflix has finished its “cloud transition,” the company says in a blog post.
But there is a more important story here. That story is the Netflix-Amazon.com alliance, an alliance that only seems to have grown stronger with time. And the fact that it is just one of many such alliances.
Netflix has not always felt easy about having its service served by a primary competitor. The company created its own Open Connect Network, a standard designed, in part, to make it less dependent on Amazon, better able to move traffic and storage to other cloud providers that might provide it with a better deal.
Netflix now accounts for 37% of the Internet’s traffic during peak viewing times – you can think of it as the 900-pound gorilla of Internet streaming. But after a seven-year transition, during which it did everything it could have done, technically, to reduce its dependence on Amazon Web Services, Netflix is signaling that it’s more dependent than ever.
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Despite Microsoft’s efforts to compete with Amazon on price regarding bare bones infrastructure, Amazon’s lead there continues to grow. Netflix might love to be less dependent on Amazon infrastructure, and it has spent hundreds of millions of dollars preparing to be less dependent on it. Yet it is dependent on it.
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But Amazon’s lead now has less to do with raw capital power and more to do with hard-won lessons learned in making that investment. Cloud has consolidated, and Amazon is the winner.
This is not a box Netflix can get out of. The company reported revenue of $1.8 billion last quarter, against $35 billion for Amazon. It has about $1.8 billion of cash on its books, but it has committed that cash into its work in building a studio to rival Viacom’s Paramount, Disney, Fox, Time Warner and Comcast’s Universal. That is its strategy, and throwing $1 billion/quarter into data centers would, at this point, make it impossible for the company to free itself from those content suppliers. Thus, Netflix has chosen to remain dependent on its primary competitor in net streaming.
What is true for cloud infrastructure is also true for commerce infrastructure. Amazon has several billion-dollar “competitors” who use its delivery infrastructure to serve their customers. It has many other companies using its payment infrastructure, especially now that sales taxes on online sales are becoming routine, raising the cost of compliance beyond what many small players can afford.
Amazon is an infrastructure company. Do not analyze it as a retailer. Do not analyze it as a streaming company. Don’t even analyze it based on cloud revenues. Amazon is infrastructure, infrastructure on which global commerce is increasingly dependent.
Link to the rest at Seeking Alpha