What product are you referring to? I'm in this industry and based on my experience their video encoding+storage+streaming offerings are actually higher priced than their competitors. The reason their services are popular is the integration with the rest of AWS (which is true for most of their offerings).
The only cheap thing that Amazon offers is fast shipping for low-cost products, e.g. buying a $3 cable and getting it shipped for free the next day (assuming you have Prime). But for anything above $50-$100, Amazon is almost always the more expensive option.
https://slate.com/technology/2013/10/amazon-book-how-jeff-be...
The whole point of predatory pricing is that you jack the price up if you don't currently face any competition and use the threat of plunging prices to scare off competitors, so of course they're going to be more expensive by default.
Take the encoding example above, you might pay a competitive price for the compute time required to encode, but you'll be paying some of the highest bandwidth fees in the industry if you were to stream out your encoded video to multiple viewers.
Where electronics are concerned, for years I would go to Best Buy to look at merchandise first-hand, then go home and buy it from Amazon, because Amazon was almost always significantly cheaper (especially before they started collecting sales tax).
Now it's the opposite.
I use Amazon to find products, read reviews, etc., and then I go to Best Buy's website to order it. It's almost always the same price or lower at Best Buy, and since I happen to have a Best Buy store only five minutes from my house, I can order it and pick it up in under an hour.
I don't think this is the case. The strategy is called a "loss leader", and it's a very common business strategy.
https://www.investopedia.com/terms/l/lossleader.asp
> Loss leading can be a successful strategy if executed properly. A classic example is razor blades. Gillette, for example, gives their razor units away for free knowing that customers must buy their replacement blades, which is where the company makes its profit.
It's true that big companies can find profitable loss-leaders where small companies can't -- though this isn't always true; my startup uses a loss-leader B2B product to unlock a more attractive B2B2C offering.
I think what you're observing is that monopolists tend to be more able to use loss-leaders, since their monopoly power gives them the ability to charge a premium on their monopolized good(s), which would increase the scope of profitable loss-leaders. However loss-leading is certainly not a monopoly-only strategy.
It's certainly a scale thing. What's notable about Amazon is they can run a losslead for an entire sector of industry, not just a single product. Note a grocery store could loss lead toilet paper so much no one can afford to produce toilet paper (maybe); but, could you imagine one which could afford to loss lead _all paper products_ to sell more coffee for long enough to wipe out all other paper retailers?
Because amazon can, and is, doing this systematically. And after that we no longer have fair-market prices, because there is no market but amazons for these goods.
Both exhibit the same behaviors with the same explicit goal.
You are debating semantics when the intent in both cases is the same.
In new markets we tolerate monopolies because we want to reward entrepreneurs.
The question to ask is whether the cost of rewarding Amazon with monopolies is beginning to outweigh the benefits.
That being said, their ecommerce org was still a complete mess. They were spending a ton of money operating a homemade ecommerce platform based on 2007 technology. They even had a mainframe running some critical features that they couldn't manage to deprecate. They ran everything focused on costs and didn't even do it right because they never considered the long-term benefits of investments. The architecture was multiple balls of mud. Teams were all aligned horizontally. Meeting customer needs wasn't never a factor in any decision making that I saw (and I spoke regularly to the CTO).
What does this mean?
Wait. And this is 100% not meant to be snide, it's a real question.
Isn't that the actual strategy for tech startups? Work with investor capital long enough to get established and own the market by selling at negative margins, then increase the price once you own the market?
Of course you might price your product less, but from a certain point of view it's less predatory than it is just fair market price. When you are a startup with no customers, your first customer is taking a chance on you. They have no idea what the quality of your product is. They have no idea if you're going to be around to support it in 6 months. All that uncertainty should be factored into the price. If you are a more established startup then the fair market price for the exact same product all other things held equal, should be higher.
I think though we need to recognize that Amazon is succesful for a reason, and those reasons are why they are in a position to invent even deeper and more relentlessly...
The last 20 years of PC gaming has been one of theft and grand larceny by steam, valve, EA and co. We used to get dedicated servers and level editors in games.
The internet allows companies to steal software from the point of production, because 2 or more computers in a network act as a single machine. So that means the internet is one giant world sized computer that companies de-facto own and control because they now "issue commands" to other nodes in the network.
We now live in a digital authoritarian society where we must get permission to use our software and have no privacy if we want to participate in the culture.
AKA the internet has been the greatest force for software theft and dispossession in all human history.
Because of the criminal way in which IP law was coded the public never got any property rights and this has created the greatest human rights disaster in all of history.
DRM in the OS, apps or games is literally you living in an open air prison and CEO's and government orgs can literally spy on everything you do.
Windows 10 is a case in point. There's no reason for client-server software anything for a home user.
We used to have to deposit a quarter every time our character died, and with zero save points.
Steam would have never got off the ground in 2004 if we had portal technology, man would have gotten killed.
IMO, this is like asking "is it still a democracy if the people don't decide on every bill directly?" In a sense, the answer is no–but I still feel comfortable using the word democracy.
I'm going to keep going with this analogy—IMO, idolizing the idea of a completely unregulated market is akin to idolizing the governing structure of ancient Athens. Yes, the rules we've added over the past millennia make us less free in a way—but they also make for a more sustainable system. These refinements are a sign of maturity.
I think you're caught up in an is/ought conundrum though: "idolizing the idea of a completely unregulated market" is the discourse! That's the pro-side rhetoric in a nutshell, how bills and laws get passed, and how the (US) economic system is constructed. So don't blame my inference, it's just what I'm reading in the newspaper.
GIMP hasn't killed Photoshop. It's all about giving value for money, or at least the perception thereof.
A practice neither invented by nor exclusive to Amazon, but they tend to get called out on it often, anyway: https://en.wikipedia.org/wiki/Loss_leader
And retailers like Target who get consistent customers that compare products in-store just stop carrying their competition.
https://www.statista.com/chart/18819/worldwide-market-share-...
But even AWS admits that only 5% of Enterprise workloads are using any cloud provider.
Also that includes IAAS and PAAS and private cloud services not companies like Linode that offer just a VPS nor places like Rackspace.
If you want a simple group of VPS’s to setup your own website to sell goods and you’re hosting on AWS (outside of Lightsail), you’re doing it wrong.
I’m a cloud true believer, know the ins and outs of AWS well, etc and I wouldn’t use AWS - besides Lightsail maybe - if I just wanted a VPS.
x264 is good but not the benchmark. x265 is simply mediocre.
That aside, as others have pointed out, there is the whole "in the cloud" thing which has to do with global TCO.
Also the pricing you can get of the AWS site doesn't look a thing like what an actual content distributor with 100 of thousands of hours of content gets.
Also, “the others” that pointed out TCO - was me.
For instance it didn’t make sense for DropBox to stay on Amazon but it did make sense for Netflix.
Prime all together only made 14 billion. Considering that prime almost assuredly doesn't cover its 2day shipping we can be very sure, the video unit is _certainly_ not positive.
What's even more important is this quote from Bezos, which directly states it's their strategy:
"We get to monetize [our subscription video] in a very unusual way," Bezos said. "When we win a Golden Globe, it helps us sell more shoes. And it does that in a very direct way. Because if you look at Prime members, they buy more on Amazon than non-Prime members, and one of the reasons they do that is once they pay their annual fee, they're looking around to see, 'How can I get more value out of the program?' And so they look across more categories — they shop more. A lot of their behaviors change in ways that are very attractive to us as a business. And the customers utilize more of our services"
https://www.businessinsider.com/amazon-ceo-jeff-bezos-said-s...
It's a _publically stated strategy_.
Maybe for subscription video specifically Amazon is more unusual, but it's certainly not because Bezos came up with some wild strategy. Movie and TV producers themselves aim for far more monetization than just the sticker; merchandizing, product placement, ancillary media (sountracks/interviews/tie-ins), etc are all things commonly aimed for. And even for subscriptions there are players like Apple, who clearly are interested in selling more Apple hardware.
I guess what bothers me about what you're saying is that I don't think it makes sense that every single unit in a company needs to "pay its own way", and on the contrary that sort of reasoning in management is the source of a lot of horrors many of us have experienced in IT. Security say gets cut to the bone because it's "not a revenue generator" and down the road systems get broken into causing tons of costly damage (infuriatingly often externalized too to add salt to the wound). Outsourcing sometimes can be an answer, but that sometimes creates its own major headaches as well. Amazon's size and weight certain give rise to concerns that might be lower elsewhere, but some of the bonuses they bring represent quite genuine economic value, and either way I don't think justify what seems to be a general argument against vertical integration.
My guess is that Prime Video exists as a "gateway drug"; you get it for the videos and then realize that extra $4/month or $11/year will get you free shipping, and then you're back to "if I order $120 worth of shipping, it'll pay itself back" thinking.
So, Costco? Or other member/buyer-club type things across many industries? It seems to have become somewhat less common, but it's still not remotely a unique idea. Psychologically, even expiring coupons and sales invoke some of that feeling of "use it or lose it".
>My guess is that Prime Video exists as a "gateway drug"; you get it for the videos and then realize that extra $4/month or $11/year will get you free shipping, and then you're back to "if I order $120 worth of shipping, it'll pay itself back" thinking.
It's interesting you have that perspective because I've always heard and experienced it as the opposite, though I haven't followed it for a while. Prime of course started based fully around shipping, and it has seemed fairly common for a lot of old Prime users at least to never use any other Amazon services at all despite them really, really pushing them. I never have either personally fwiw. If you're doing enough business with Amazon (~$5.1k+/year) it's also probably more direct to just use their dedicated card I guess.
And there's a reason upfront costing has faded in general, it's usually discouraging rather then encouraging. Causation seems more likely to flow the other way: somebody looks and sees they're doing quite a lot with Amazon already, and then decides to try to further leverage it. Of course, Amazon certainly wants to encourage this and support it so that customers don't "grow out of them", and being a full fat full service provider probably can aid them in retention. I'm not sure all this supports the original contention however.
Some retailers do this too, mainly warehouse clubs (e.g. Costco and Sam's Club).
nothing requires a monopoly. monopolies are manipulative (cross-)market distortions.
I'm not sure I agree with your characterization of that as a monopoly strategy, and I'm also genuinely curious how you know those are "negative margin" services. To the first, the strategy seems more about vertical integration than monopoly per se. Plenty of businesses aim to make a profit overall, but either have an outright strategy of loss leaders or more commonly have individual services that are absolutely necessary to the rest of the business yet are not profitable in and of themselves. And if the opportunity comes to leverage some of those internal divisions to some degree it can be completely reasonable.
To the first, the console market would be an example of a competitive sector (at least since the mid-90s) where players have quite fairly run one part at an initial loss (hardware in the first few years) with the plan to make it up on add-ons. They can further average break-even or profit over the product lifespan, because the hardware functionality is fixed but will be vastly cheaper to manufacture in Year 7 vs Year 1.
To the second, it's not uncommon at all for a business to require a certain amount of internal hardware or services for operations that is sitting idle a fair amount of the time, generates no direct revenue, or both. This is part of the whole logic behind cloud computing, or the constant tension of critical IT being seen as a "cost center". There isn't much minimal size for that to be the case either, even a small company may easily have a share of underutilized kit. In those cases, the marginal cost can be extremely low, even near-zero. If it can be turned into any sort of useful service or value-add at all with low enough overhead then it's still of value.
So I'm concerned your formulation is overly reductive of any company to its parts. The vertical strategy has real advantages as well as disadvantages, gains that are quite genuinely win-wins which is why they work. For AWS for example, that's a core business for Amazon and also something they require for their own activities. How much of the capacity is sitting idle at any given time so they can be prepared for when actual high priority customers need to spin things up? They certainly require significant margin to respond to variations in demand. Video encoding seems like a great way to fill troughs and average things out, since it can easily be run low priority, and the marginal cost is going to just be the electricity running chips at full vs power saving. Compared to all the cost of having the datacenter and hardware and staff supporting it at all, even just sitting around doing nothing, that's probably a pretty low fraction. Is video coding actually costing Amazon money vs what value they gain, or is it simply an area where they quite genuinely can do it for less, putting otherwise idle necessary capacity to use? And what about Azure or GCP, or even someone just running dedicated encoding hardware? How does Amazon have a monopoly on compute? If they're merely able to do it cheaper thanks to scale, what exactly is the problem? If they raised prices above what competitors or someone could do themselves where is the lock-in for video encoding?
They sell products at a loss to gain income in other places. For example, if you are a content producer you are competing with a company that sells "ad-free" video (Prime Video) attached to a low-cost service (Prime) so that they can sell more goods online.
Amazon is killing content producers by running a negative margin content business to do sell-through on e-commerce.
Amazon is killing video encoding business by selling a negative margin video encoder to sell through AWS compute.
This is extremely common in every "field" Amazon is in. They run at negative margins in one huge sector of business because it drives massive income in another.
That is a strategy only available to... monopolies. You can't afford to compete with them, because they are not _even trying_ to make a profit in your sector.