Author(s): Peter Bryer
Amazon, the world's second-largest virtual mall behind Alibaba, will be carrying two fewer popular items at the end of October. The company's exact intentions behind the decision aren't clear, but some suspect that the declaration that it will stop selling Apple TV and Google Chromecast devices is a strategic branding blunder or a blatant antitrust violation. However, it could be a sensible move in a digitally converged environment.
At face value, this is principally about optimizing the Amazon Prime Video experience. Apple TV and Google's Chromecast don't currently support Amazon Prime Instant Video, and Amazon is arguing — with some validity — that its customers could be confused by incompatibilities. However, it's not clear whether this lack of support is owing to an absence of trying or of agreements between the parties — there's no Chromecast button on Amazon's Instant Video Android app, for example.
The decision to stop carrying competing products is a clear issue of favouritism, and runs counter to Amazon's past statements about being agnostic regarding items sold by its third-party sellers. This could be confirmation that we're entering an new era for connected products in which sales, service and device are so tightly fused with an underlying ecosystem of apps and content that consumers will be increasingly required to choose sides.
This highlights the growing intensity of the competition between major ecosystems. Amazon, Apple and Google continue their vertical integration of everything from hardware to services. The law of large numbers has kicked in, and a key objective is now to maximize wallet share.
Amazon's Prime service has a track record of increasing sales among subscribers, with some reports claiming that Prime users spend twice as much or more than their non-Prime counterparts. Prime, like other membership services, has a thought advantage as users look to make the annual fixed service fee worthwhile. Amazon has invested heavily in video, making it a key perk of Prime membership, and this strategy appears to be working — the company reports that its Fire TVs and Fire TV Sticks are among its fastest-growing product lines ever. Amazon's management believes there's little incentive to disturb this momentum by supporting competing products and services.
However, Amazon has generally been open to supporting most platforms with its services and sales, perhaps one reason why the news has received so much attention. The company carries rival e-readers, for example. But Amazon has clearly won the battle in this area.
The exclusion of competitors' products from sales channels isn't unprecedented in the industry. Apple, for example, has pulled software and hardware from its channels. Bose speakers bounced in and out and back into Apple's stores after the company acquired Beats, and some rival wearable devices were removed from Apple shelves when the company introduced its own watch. It's also pulled apps, in moves that some argue are more about company than consumer protection — the likes of Bitcoin mobile wallet programmes and music download facilities have been removed and labelled unsanctioned, but cynical users point to a conflict of interest with Apple's services.
It's debatable whether consumers will be truly perplexed or terribly inconvenienced when they can no longer find Apple TV and Chromecast products on Amazon's site. Amazon and its partners are known for carrying just about everything. Two high-profile products will seemingly vanish from Amazon at the end of October. But the company knows that ignoring the competition doesn't mean it will disappear, and those competing devices are ultimately a few clicks away. The added steps might dissuade a few, but not many.
CCS Insight believes that there's more in the way of competitive politics to this than it appears. Some behind-the-scenes diplomatic efforts between the companies are likely to have failed, leading to pulled support. It's possible these breaks can be healed and that Amazon can reverse its decision.
We expect that the harm to Amazon's image will be slight unless this develops into a larger skirmish between the companies. Amazon continues to sell other competing products including some from Apple and Google, which directly or indirectly support competing ecosystems. Amazon's neutrality remains largely intact, but places Fire TV first.