I find it to be a peculiar business decision to completely (as much as you can) migrate to one of your largest competitors' cloud service. It seems like Microsoft is the only, of the larger cloud providers, that doesn't -really- compete with Netflix. (Google has YouTube, and I guess even Microsoft has a much smaller Windows Store presence.) Even if Amazon can't access the raw data, they could see how you're utilizing it to improve their own video service, and they get the benefit of billing you and potentially using their pricing leverage to squeeze your margins.
I feel like Apple's approach of utilizing multiple providers makes more sense (though they do this for uptime and redundancy.) Maybe I'm being a pessimist.
> Even if Amazon can't access the raw data, they could see how you're utilizing it to improve their own video service, and they get the benefit of billing you and potentially using their pricing leverage to squeeze your margins.
So you're saying Amazon is going to risk millions of dollars so they can make a few more bucks on video streaming, which is like 3 levels down from their primary business?
Prove it. I had an argument with my last company about this very issue. If Amazon's primary business was video delivery, then that would make a lot of sense. But where does Amazon's primary revenue stream actually come from? That's right, it's AWS. Amazon may be an excellent retailer, but they spend just as much money as they make on the shipping and fulfillment side to get shit on your doorstep faster and cheaper than anyone else out there. Each person that spends money on Amazon can only really spend a few hundred dollars per year. But even a small company that's entirely hosted on AWS, like 70% of the companies I've worked for, pays Amazon thousands of dollars per month for hosting. There's definitely more people than companies, but shipping stuff to people costs a lot more money than Amazon needs to pay in order to have your stuff hosted by them. Plus they do a lot of R&D into making their own systems faster and more efficient, eventually passing savings down when they re-work their pricing tiers.
Basically, my argument is/was that the whole idea of Amazon stealing your IP to make a few extra bucks on whatever they happen to be doing is totally bunk. Amazon is really in the infrastructure business, and if you're a video startup...you're NOT. And take it from someone who watched a company try and fail to build a competing private cloud with no budget and a skeleton crew...it's stressful and not fun at all.
The main reason to use multiple providers is, as you said, uptime and redundancy...and "not putting all your eggs in one basket", so to speak. It's an engineering, not political, decision. My last company could have probably saved themselves by moving everything to AWS and shutting down their Level3 internet-backbone connectivity and direct fiber from the office to the datacenter (which is the same technology AWS is using anyway, except they have an actual cloud API and not just a pile of servers), but they were too busy conflating this engineering/performance decision with one that must be made for political reasons.
>>Prove it. I had an argument with my last company about this very issue. If Amazon's primary business was video delivery, then that would make a lot of sense. But where does Amazon's primary revenue stream actually come from? That's right, it's AWS.
Let me try. Earlier Amazon's primary business was selling books, then it "became" selling almost every object that can be legally sold, and now you are saying that it "is" AWS. What about tomorrow? Tomorrow, it easily may "become" selling videos too. With Amazon it's very much possible.
So, it's not just technical issue, it's a political/business issue too.
Of course, as you have said, they must take into consideration the trade-off. If the trade-off is more like "killing yourself under the technical burden of setting up a good network" vs "potentially allowing/helping Amazon to take advantage of your hosted service on their AWS and thus to become a future competitor" then they may go to AWS and/or other cloud provider(s).
Microsoft's business shifted too. Long gone are the days they were a software vendor for end user. Nowadays they produce services and hardware products for enterprise customer. And end user are the product, their new subscription based Office and Win10 collects a lot of private data like key presses (keylogger), audio from microphone, scans documents and uploads unspecified tracking data in many encrypted TLS (phone home). And Microsoft is known to suddently compete with you. There is a rule, never compete with Microsoft, they have more money than you, they will make their competiting product/service/hardware available for less money than you could offer.
But where does Amazon's primary revenue stream actually come from? That's right, it's AWS.
Looking at Amazon's Q1 2016 Financial Results [0], page 8, we see that net sales of non-AWS amounts to ~$26B, and AWS is ~$2.5B. From the Segment Highlights section (same page), AWS sales is 9% of total sales.
AWS beats non-AWS income only because there were losses in international; ignoring international, it's a $16m difference.
Looking at page 14, Media sales in North America and International sum to $5.6B. Media sales alone is double AWS's sales of $2.5B (page 13). Profit margins are way higher for AWS, so there's still a lot of room for a larger income difference between the two segments.
Based on this, someone doing media streaming as their primary business needs to be aware of who they are in bed with infrastructure-wise, but I agree that it doesn't mean that AWS isn't worth using just because Amazon is in the same market/area. Media sales are a big portion of Amazon's non-AWS sales, and being digital are most likely fewer headaches than physical goods; but not so big of a portion that one needs to worry about Amazon being the 800lb gorilla that would need to be contended with. It's more likely that Amazon is a threat to Netflix on licensing deals and content offerings (IMO, Netflix is slightly stronger, but neither are great, in content offering).
Is Amazon going to pull the rug out from under Netflix? Not if they want anti-trust attention. Is Amazon going to disallow the Netflix app to run on their devices? I suspect no, since they seem to want to create a platform rather than a walled garden when it comes to devices and media. Is Amazon going to undermine the trust in AWS by using AWS customer's data, or metadata about their customers, for their own gain? Probably not. If I'm going to put money on who's going to do "the right thing", for businesses and tech as a whole, it's going to be on the likes of Amazon rather than, say, Oracle.
Looking closer at (just) this (document), the growth numbers are such that it could go either way as to which revenue stream will eventually be the major contributor to Amazon revenue streams. That's a significant reduction in losses (-60%) over Q1 2015, so International turning around over the next year or so could keep AWS and non-AWS income neck and neck.
Hell, the prime video player is far more buggy and error prone than the Netflix one at least on my media PC. So they can't even reverse engineer that well.
Good points. I'd just like to point out that, there are "political redundancy" reasons to diversify to multiple (cloud) providers: you could easily get in a billing dispute with a single vendor - if that means your entire business grinds to a halt, then that puts you in a very weak and vulnerable position.
I don't know if the extra effort of using eg. Google and AWS is worth in order to "stay up when AWS goes down" - but it might be worth it to stay up if/when AWS cuts you off for some reasons (quite possibly due to human error, billing, a take-down notice or other legal dispute etc).
None of that helps if you might accidentally find yourself on the wrong side of the "war on terror" by publishing news - in such a case all your US funds and assets might be frozen, and you would need a non-US presence in order to stay up while sorting out the potential error. But I suppose it's no worse than being subject to other kinds of arbitrary censorship...
The billing redundancy argument would be applicable generally but in the case Netflix on AWS is not something Netflix has to worry about.
Netflix is a marquee AWS customer. The PR damage of Netflix even making noise about leaving AWS would be terrible for the service as it fights for market share against Azure and Google. Netflix will get their way.
Exactly, if Amazon wants to keep AWS as the backbone of large parts of the internet, they need to be able to prove other business considerations don't affect it - if they ever treated Netflix any differently than another marque client they'd torpedo the trust in them from any organisation who think they might compete in the future.
That was my first thought. Sabotaging one of the most conspicuous brands (and arguably their flagship customer) in the United States today sounds like an excellent way to commit business suicide - how many other tech companies would they cede to their competitors? Could a company ever defend using AWS again if they even tangentially competed with Amazon? Moreover, I bet that AWS is much more central to their long-term than Amazon video is. That just seems like a ton of risk for very little upshot.
>Amazon may be an excellent retailer, but they spend just as much money as they make on the shipping and fulfillment side to get shit on your doorstep faster and cheaper than anyone else out there. Each person that spends money on Amazon can only really spend a few hundred dollars per year. But even a small company that's entirely hosted on AWS, like 70% of the companies I've worked for, pays Amazon thousands of dollars per month for hosting
But there are a lot more people than businesses, and an order of magnitude more people than businesses who both need custom hosting infrastructure and choose AWS.
> But there are a lot more people than businesses, and an order of magnitude more people than businesses who both need custom hosting infrastructure and choose AWS.
The first part is irrelevant, because almost none of those people will ever buy a service from AWS. The second part is false.
An order of a magnitude more businesses are utilizing AWS than 'people.' AWS doesn't exist for consumers or average people, it's for businesses. That was the whole point of its existence: the primary customers of AWS are businesses, and always will be. It's where the radical majority of their sales come from, businesses with greater than 10 employees; not from solo developers spending $37 per month, and absolutely not from your average person that doesn't know anything about cloud computing.
Amazon has spent years screwing with Amazon Prime video subscribers on Android to the detriment of the Prime brand and their brand as a whole in the eyes of many of those affected users. Amazon could very well screw with AWS to the benefit of Android Prime video for reasons only upper management can discern.
For starters, your company is not the largest video provider in the world, like Netflix. As someone else mentioned here, diversification can be for "political" reasons as well. Especially if you're as large as Netflix; diversifying could keep your billing in check. Let's say you split between AWS, Azure and GCS. That gives you the ability to scale based on what is cheapest. You could also do public and private clouds in tandum. You can scale your private cloud/on-premise to the public cloud if need be with most large cloud providers (though I never suggested they use on-premise.)
As far as this not being Amazon's primary business, well, they are a lot bigger and diverse. But let's use a Wal-Mart analogy. Wal-Mart is so powerful (maybe not anymore, because of Amazon) that if it doesn't like your wholesale pricing to them, they can move your shelf space and practically destroy your business. They have the leverage in those relationships. Now, with AWS being the #1 cloud provider you have a similar lock-in, at the very least your switching cost would be quite high.
So, let's just for example sake say Amazon make a decision to give their own video streaming priority on their own cloud. That's not breaking net neutrality laws, because...it's their servers, this has nothing to do with telecom. So now Amazon Prime Video, streams 4K at a much better rate than Netflix (and Netflix would likely never know.) Then, perhaps another assumption, AWS decides to increase their pricing tier for their media servers for streaming. So suddenly they have squeezed you in two ways. Quality of Service and pricing.
Amazon could easily do a calculation to compare themselves to Azure and GCS to tell what is the proper amount they could get away with and still make it more expensive just to migrate to a competitor. You're locked-in, and just to make up for your switching, it would cost, let's say 1 years worth of AWS service. Hard to explain your sudden blip in earnings to short minded investors.
Anyhow, all I am trying to say is...it would make more sense, to me, from a business stand point to diversify across multiple providers instead of being all in on AWS. I never said you had to have an on-premise set-up. It would be much different if they were a small start-up, but Netflix is not. It can at times take up more internet traffic than torrenting.
I will point out though that services like Docker are making cloud lock-ins harder to do, but they don't solve reliance on APIs or just proprietary offerings. There's a reason why Google, Microsoft and Amazon all underline, push and constantly improve those offerings as a form of lock-in.
It is possible Netflix has some sort of pricing agreement with Amazon that locks in a rate for x amount of years. But either way, when you're as large as Netflix, I think diversification is the better long term strategy.
I don't see Netflix and Amazon being serious competitors...yet. For both of them, the main competitor is cable. The more that either/both of them are able to get people to "cut the cord," the better it will be for both of them.
I can't speak for others, but for me, the decision wasn't, "should I choose Netflix or Prime Video?" Instead, it was, "Can I find enough programming to satisfy me for less than I'm paying for cable?" The only way my answer was yes was with multiple streaming subscriptions.
Amazon could, if they wanted to, obtain a lot more useful data from the data Netflix hosts in AWS than Samsung could from just making chips for Apple. So I'm not sure if it's a good comparison.
I think for smaller companies it could make sense but Netflix is big enough and visible enough that if AWS cut them off, I think you'd see a huge exodus off of AWS of people fearing they would be next ... simply not worth it to Amazon to shoot itself in the foot like that IMO
They only migrated their billing infrastructure because the rest of Netflix is already in AWS. As far as I'm aware, the only non-AWS Netflix component remaining is their CDN. (And it will likely remain that way.)
Just to be clear -- their video streams are still served up via Netflix's OpenConnect appliances. The surrounding infrastructure -- everything "outside" of the play button -- finished moving to AWS.
Their billing system has now joined its siblings in living on AWS.
Yeah, this decision makes no sense, AWS is not even cost-effective past a certain, relatively small, amount of resource usage. Netflix could have easily built their own infrastructure for this, plenty of smaller companies do it and save tons of money. The only thing that would make sense here is if Amazon offered them their services at a huge discount, which could be a move looking to either acquire Netflix in the near future or cripple it.
it is WAY more cost-effective when you get to that kind of scale to use someone else's battle-tested APIs. the best part is that when that stuff breaks down, it's not your job to fix it.
At this point, I'd imagine Netflix's main expenses are not engineering/bandwidth/compute -- it's content. My guess is that there's better ROI in paying Amazon a premium to not have to worry about the CDN engineering while concentrating investment on expanding their library.
How do you know Microsoft will not compete with you sometime next quarter? Did you anticipate the LinkedIn purchase with which Microsoft enters the job search market?
I feel like Apple's approach of utilizing multiple providers makes more sense (though they do this for uptime and redundancy.) Maybe I'm being a pessimist.