Amazon

Amazon’s Streaming Device Power Play

Apple TV and Chromecast enthusiasts need not apply.

That was the message out of Amazon this week – when the eCommerce (and delivery, and video streaming, and Web services, and grocery, and on-demand, and IoT) company announced that going forward it will no longer be selling Google and Apple video-streaming devices on their site. As of now, no new listings for either device are allowed, and as of Oct. 29, the old listings will start to be taken down.  

The move was attention-grabbing.  

“Amazon Basically Just Confirmed Everyone’s Worst Nightmares About Amazon,” was the SEO headline over at Slate about the story.

How many people clicked that link thinking they were about to find out that two-day Prime shipping was about to be canceled is unknown.

What is known is that while not every news source has quite the flair for the dramatic the Internet optimization team over at Slate has, words like “hardball” “power play” or (among the particularly alarmed) “censorship” did appear in several columns, as the consensus is that Amazon is flexing its muscles and the power of its very engaged consumer base to push the video streaming ecosystem.   

So why the sudden change of heart and why all the tempest in the eCommerce tea kettle?  

Why Apple And Google Are Out

The official reason given by Amazon for pulling the Chromecast and the Apple TV is not that they compete with Amazon’s more recent entrance into the TV smartening area – the Fire TV – but instead that they “don’t cooperate well” with Amazon Instant Prime’s video streaming service.

“Over the last three years, Prime Video has become an important part of Prime,” Amazon said in the email, which was sent to sellers yesterday, reports Bloomberg. “It’s important that the streaming media players we sell interact well with Prime Video in order to avoid customer confusion.”

Hmm.

Prime Instant Video is one of the major inducements into Amazon’s $99 per year Prime program – and it’s an inducement that the company has invested heavily in in both the production of award-winning original content (like Transparent, which recently grabbed 5 Emmy Awards) and in the big-ticket acquisitions of refugees from traditional broadcasting (like “Top Gear”).  

And that strategy has paid off.

From almost out of nowhere, Amazon has become a major player in the streaming device marketplace — 85 percent of the market share is split between Roku, Amazon, Apple and Google. In 2014, Amazon bumped Apple from the No. 3 spot with the Fire TV. Many analysts expect that the Fire TV will nudge the Chromecast out of the No. 2 spot sometime this year.  

Interestingly, the non-Google, non-Apple major competitor, Roku, is still for sale on Amazon, as are other putatively rival products like Microsoft’s Xbox and Sony’s PlayStation — as all three are easily compatible with the Amazon Instant Video App.  

Snarky Suspicions

Amazon’s decision to limit sales of two major competitors’ products right before the holiday shopping season goes into full swing has not been met with a full-throated chorus of cheers. Some have criticized the move as being motivated more by spite than by sound reasoning.  

Some noted that whatever work this does to boost Amazon’s ambitions in the streaming arena — it weakens their footing in their core eCommerce business.  

“This has the potential to hurt Amazon as much as it does Apple and Google,” Barbara Kraus, an analyst at Parks Associates, told Bloomberg. “As a retailer, I want to give people a reason to come to me. When I take out best-selling brands, I take away those reasons.”

Moreover, the move is somewhat uncharacteristic of Amazon, according to James McQuivey, as it means the company “has to forgo the amazing market knowledge it gains by selling competitive devices,” something it normally rather likes.  

But in this case, McQuivey told USA Today, Amazon is probably feeling a little more confident.

“People don’t buy an Apple TV to put it on the shelf, they buy it or any of the other OTT (over the top) devices to watch top TV shows and movies,” McQuivey said. “Mostly Netflix, with some Hulu, but also Amazon Prime and YouTube. Amazon is in a position to pressure Apple and Google to put Amazon Prime content on their devices because without Prime shows, their devices are inferior.” 

And, armed with that, Amazon is ready to play some hardball.

“Amazon probably wants to teach Apple and Google a lesson about not making their devices more compatible,” said Allen Grunes, a lawyer at Konkurrenz Group in Washington. “This is one way to do it and it’s not likely anticompetitive.”

Michael Pachter, an analyst at Wedbush Securities in Los Angeles, noted that the move “sends the wrong signal,” to consumers, and that the official explanation of why is “especially weak.” He also doesn’t agree that the move is not anticompetitive.

“Fewer than 20 percent of Amazon customers are Prime members,” Pachter said. “What about the 80 percent who want an Apple TV to stream Netflix? I think that the excuse of avoiding consumer confusion is a not-so-veiled attempt to favor Amazon first-party products over third-party products, and think it was a bad move.”

What Next?

The anti-competitive question is open — and probably always something of a concern for Amazon after the multi-year antitrust battle with Hachette books over whether Amazon’s tendency to make certain books hard to obtain or pre-order while the two companies were fighting about pricing were inherently anticompetitive measures.  

That battle essentially ended in an a draw with an out-of-court settlement last fall.  

Most think that because users have a variety of other options for purchasing both Apple TV and Chromecast, antitrust accusations won’t be quite so sticky in this arena as they were for Amazon and a bookseller.  

That said, the move is still a blow going into the holiday season — for Google more than Apple. Apple, after all, has its own very developed retail network with dedicated fans, but a lot of Chromecast users do most of their shopping on Apple.  

Then again, as of this year, Google’s Chromecast has almost 30 million users, meaning the product is popular. Perhaps popular enough that Amazon has successfully driven a lot of people to Best Buy to pick one up.  

Whatever the outcome, it is becoming clear that as the shopping season approaches, the big boys are clearly comfortable throwing some elbows.  

And PYMNTS will keep you posted on what the injury list ends up looking like.

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