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Netflix, Amazon typify corporate 'coopetition'

Netflix's error message. The streaming media company blamed its recent outage on Amazon's cloud servers. It's an example of how companies that start off cooperating can turn into fierce competitors.

Christmas Eve was a bad night for Netflix. Just as millions of Americans were sitting down with their families, maybe thinking of putting on a movie, Netflix’s streaming service went down for most of its users. The culprit, says Netflix, were servers it uses owned by Amazon. Amazon, as it happens, also runs Amazon Prime, its own streaming service that competes with Netflix. 

There’s a name for this kind of relationship: “coopetition," as in cooperation plus competition.

“Frienemies. That’s another way to put it,” says Ethan Kurzweil, vice president at Bessemer Venture Partners, a venture capital firm. He says we’re seeing more and more corporate relationships that you might call complicated.

Netflix CEO Reed Hastings derides Amazon’s rival video streaming service. But he sings the praises of Amazon’s web servers, at least until they knocked Netflix offline briefly this week.

“It certainly makes for a great story,” says Eric Clemons, a professor at the Wharton School at the University of Pennsylvania.  

He says no one is suggesting this outage was malicious on Amazon’s part, but it’s another example of just how complicated the borders between companies have become.

Apple, for one, still relies on Samsung for many of its chips, even as their smartphones duke it out. And, Apple has been trying to distance itself from Google, now that Android is the iPhone’s fiercest rival.

“Most people simply didn’t understand what being dependent on Google meant,” Clemons says. It’s hard to predict when a friend might become a foe.

Kurzweil of the venture capital firm says many startups get off the ground using Amazon’s servers or maybe selling through Amazon’s site. That can be a boon, or end badly.

‘The result is that Amazon knows a lot about their businesses and can always choose to compete,” Kurzweil says. 

And, then coopetition becomes good old competition.

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