One of the questions routinely faced by government regulators and consumer advocates is whether a company can get so big that it starts acting against its own customers' interests. Amazon, which says it is about to ban from its shelves media-streaming devices from Google and Apple that compete with its own products, appears determined to show that the answer is yes.
The huge online retailer has been moving aggressively into entertainment production and licensing, offering its own TV series and seeking exclusive deals with producers to stream their shows over its Prime Video service. It also sells its own streaming device, the Fire Stick and Fire TV, which plug into your TV to provide access to Netflix, Hulu and other subscription services as well as Prime Video.
These ventures compete directly with Apple iTunes and Google Play, those companies' streaming video services, and Apple TV and Google Chromecast, their devices. The latter will be taken out of Amazon's inventory and barred from product listings, even those of third-party sellers, on the retailer's website as of Oct. 29, according to the announcement first reported by Bloomberg.
Amazon asserts that it's taking action against Apple TV and Chromecast because the devices are incompatible with Prime Video. "It’s important that the streaming media players we sell interact well with Prime Video in order to avoid customer confusion," Amazon said.
This is a transparent dodge. There's nothing about the technology of the Apple and Google devices that prevents them from "interacting" with Amazon Prime; the problem is that Amazon hasn't reached agreements with Apple and Google to stream Prime media over their devices, most likely because Amazon objects to paying Apple and Google a piece of its subscription and on-demand revenue. (Apple takes as much as 30% in some of these arrangements.) Devices that carry Prime, such as Roku's set-top box, Microsoft's XBox, and Sony's PlayStation, aren't subject to the Amazon edict.
It's not unprecedented for a company to remove competing products from its retail stores. As Wired reminds us, Apple itself did so after its acquisition of Beats, when it evicted rival Bose audio products from Apple Stores. But Apple Stores are explicitly geared to selling Apple products. Amazon fashions itself a general retailer. Its entire customer pitch is that it offers almost unlimited choice -- it's "The Everything Store," as Brad Stone's 2013 book about Amazon was titled.
This isn't the first time that Amazon has used its enormous heft to strong-arm a commercial adversary. In 2010, the retailer removed customer access to books published by Macmillan in an dispute over e-book pricing. During another such standoff last year, Amazon stopped taking preorders and delayed shipments of books published by the Hachette group, which owns Little, Brown & Co. and other imprints.
Amazon's strike against Apple TV and Chromecast may have a similar motivation. Amazon is pushing hard to market its Prime service, which costs $99 a year. Prime originated as a deal for free expedited shipping and later expanded to include e-book lending and streaming video and music. But analysts say that only about 20% of Amazon customers are Prime members. By removing the Apple and Google devices, Amazon presumably hopes that its customers will be steered to devices that offer Prime content, or that Apple and Google will capitulate on a deal to offer Prime. The assumption is that either outcome will spur more Prime subscriptions.
It's doubtful that Amazon's move rises to the level of an antitrust violation, because the banned products remain widely available. Apple owns nearly 300 stores in the U.S. alone, and Google sells Chromecast through other retailers. Both offer their products online.
What should concern customers is the evolution of what's commonly viewed as an impartial marketer of others' goods into a marketing arm of a corporation that already dominates e-commerce. Amazon has reached that point by stressing customer service; having established its primacy, it's moving to cram its proprietary choices down its own customers' throats. This is the threat always posed by latent monopolists. Their behavior appears benign as they build toward a monopoly; once they've achieved it, they squeeze their advantage ruthlessly.
That's why the Federal Communications Commission and consumer groups have been fretting over the possibility that Comcast could exploit its near-monopoly on cable and Internet service over much of the country to disadvantage rivals to its NBCUniversal content offerings and its own media-streaming service. While Comcast sought regulatory approval for a merger with Time Warner Cable that would vastly expand its footprint over the country, it played up its commitment to an open Internet and fair dealing with content providers. But fears about how it might use its market power to further its own corporate interests helped to sink the deal.
It's unclear whether Amazon will suffer from its eviction of Apple TV and Chromecast, or whether this is a harbinger of more aggressive tactics as it becomes less of a retailer and more of a media conglomerate. But consumers shouldn't be sanguine about this hint that the Amazon of the future won't be the everything store.
And Amazon should step carefully too. The company may believe that it has become so integrated in its customers' shopping habits that it can start dictating their choices, but it could be wrong.