July 24, 2013, 9:05 AM — Amazon.com has Amazon Instant Video. Netflix has its video streaming service. These products are two of the most popular competing video streaming options available. And they both run on Amazon's cloud computing platform.
While Amazon and Netflix are competitors, they're also business partners. At the first user conference for Amazon's cloud computing division last year, the company featured Reed Hastings, president and CEO of Netflix, during the keynote address to discuss how much he loves using Amazon's cloud to run his business a business that competes with Amazon's video streaming service.
HOW TO STREAM ONLINE VIDEOS:The 10 best options for online video streaming
Today, if companies require massive technology resources, they have two choices: Build it in-house, or outsource it. And if they outsource it, there are only so many places where companies the size of Netflix can get instant access to the hundreds and thousands of servers it uses every day. Amazon is one of those. But by providing the massive infrastructure resources, Amazon is enabling its competition.
"It's a fact of business," says Dan Rayburn, who tracks the streaming and online video services and hardware market. "The fact is: Amazon's making money off Netflix." And Netflix is running its business on Amazon infrastructure. Welcome to the newfound world of cloud computing that blurs the lines of business relationships.
They're also two very different businesses, he adds. Amazon.com is built on the premise of high-volume, low-margin e-commerce; Amazon Instant Video and its other streaming services are basically a side business. For Netflix, video streaming is one of the central cogs of the company. Around 2009 company executives started outsourcing computational tasks to the cloud given the massive expansion in video streaming. Netflix has grown from about 1 million hours a month of streaming content to 1 billion. The "cost curve proved that we just couldn't do it ourselves," Hastings says.