There was a time when Amazon and Apple had a mutually beneficial relationship.
How times change. With a pending lawsuit between the two companies, and Amazon's latest venture, which lets users store and stream music, videos, and files through its cloud architecture, Amazon is further establishing itself as a major Apple competitor that can move faster than the company that brought the world iTunes.
Apple and Amazon have long been business partners, of course. Apple was the first company to license Amazon's patented 1-Click technology in 2000, which has since become a staple in iTunes and iPhoto. Amazon has also been a longtime seller of Apple's computers, software, and iOS devices, short of any iPhone and the iPad 2.
But like so many tech partnerships, the competition side of the "coopetition" catchphrase between these two companies is ratcheting up. Amazon's Cloud Drive and the Cloud Player make up a new combination of services for Amazon's customers with a focus on music. Amazon members get 5GB for free in the company's Cloud Drive, which can hold music and any other files they have floating around. The Cloud Player lets users stream music tracks from both a computer and their phones.
Right now, that phone component is limited to Android devices, but Amazon has pledged to make it so that users can play their tracks "anywhere." That could soon include Apple's iOS devices if Amazon decides to make an app and it's approved by Apple. Based on the sea of storage tools available on the platform so far and the fact that Amazon already has five iOS apps in its portfolio, there's a good chance of that happening.
Where things get interesting is that Amazon is offering free storage and streaming of digital music tracks that have been purchased through its MP3 store. These do not count against any of the user's storage, effectively giving those who buy a track or an album on Amazon the freedom of not having to manage that file on various devices, or worry about having to back it up somewhere for as long as Amazon's in business. Apple currently offers no such assurances with iTunes, and based on Google's current paid storage plans, free space would seem unlikely in its own upcoming music service.
How does this impact Apple? Since the company purchased the streaming music service Lala back in late 2009, all signs have pointed to Apple adding similar streaming and locker-like service as part of iTunes. More recent reports have also signaled that Apple is working on a complete overhaul of its MobileMe service that will let users store files, including their music collection, and access them from various devices.
So what's the hold up on getting something like that out the door? Besides jumping over the licensing hurdles with record labels, which Apple is said to be in the middle of at the moment, the strategy also requires that the company get some serious infrastructure up and running to support such an endeavor. Amazon has long had such goods with its Amazon Web Services platform, which offers things like compute power, database tools, monitoring, storage, e-commerce, and payments and billing to third-parties. Building its own tools on top of that seems like a no-brainer.
As for Apple, it's on its way there. The company is nearing the final stages of completing a massive, reported 500,000-square-foot data center in North Carolina that will dwarf the facility in Newark, Calif., it's had since 2006. A report by Bernstein Research last week suggested that the facility, which Apple has said will be up and running by this spring, could support anywhere from 95,000 to 120,000 servers that will lend themselves well to supporting file synchronization and storage, as well as music and video streaming services.
Data centers are just the latest chapter the two companies' rivalry though. Last week, Apple sued Amazon for infringing on a trademark for the term "App Store" it had filed for following the release of the iPhone 3G. Amazon went ahead and launched its "Appstore" the next day, selling applications for Android that could be purchased and updated through a standalone application it plans to bring to other platforms.
This had been precluded by Apple's CEO Steve Jobs taking a jab at Amazon for not sharing the number of customers it had who had registered payment information with the retailer during the iPad 2's unveiling at the beginning of the month. "Amazon doesn't publish their numbers," Jobs said while talking up Apple's 200 million Apple ID account holders. "But it's very likely that this is the most accounts with cards anywhere on the Internet."
Then there's the e-book business, where Apple and Amazon face off both in digital distribution and hardware. Both companies sell digital copies of books that can be used on e-book readers. In Amazon's case, that's the Kindle, the e-ink reader Amazon first launched near the end of 2007 and which is currently on its third-generation hardware. This squares of with Apple's iPad, which can run Amazon's Kindle e-book application, or Apple's own iBooks reader and digital storefront. iBooks does not come pre-installed on iPads, iPhones or iPods; instead users have to download it from Apple's App Store.
Where things got interesting on that front is with Apple's recently introduced subscription policy. This will require publishers that sell content within their applications to provide 30 percent of the sale to Apple. For Amazon's Kindle app on iOS this does not kill off any sort of built-in bookstore, which has never been present. But it will eventually force Amazon to nix its link to the digital storefront, which had opened up in the Safari browser and let users buy books that would then show up once the app re-synced with Amazon's servers. It also means that if Amazon ever devices to sell books within the Kindle app, it would need to give Apple that 30 percent of each sale.
Along with digital book sales, Amazon also deals video content, and has gotten more aggressive in that space with an all-you-can eat streaming service it debuted for subscribers of its Prime service last month. Apple currently does not offer a way for customers to watch movies and TV shows for free, instead offering a purchase and rental service that goes through iTunes on computers, iOS devices, and the Apple TV. That too could change if Apple introduces a subscription service for iTunes sometime this year, though again that's another area where Amazon's gotten the jump.
Future battlegrounds Besides the rivalries that have shaped up during the last few years, the next few hold the potential for even more overlap between the two companies.
One of those areas may be the tablet space, where Amazon could jump into with a product of its own. So far, Amazon has hedged its bets, choosing to be a software provider for various platforms instead, funneling sales of goods and content through its site. But that may not always be the case. The Kindle has proven to be a hit with consumers, with the company managing to make it thinner, lighter, and less expensive with each iteration. And now that Amazon has set up its own platform for developers to publish applications, another device where the company can continue to have complete control over the hardware and software does not seem all that far-fetched.
Along with tablets, the application recommendation business is an emerging battleground between the two companies. While Amazon is currently limited to recommending Android apps as part of its "Appstore," it may not be that way forever. Plenty of third-party companies have taken to going through Apple's application library and serving up personalized applications.
The big thing to point out here is that Amazon's got a patent for recommending items based on user tastes. Apple filed for a trademark extension to cover its Genius recommendation service to apps and music (not just its customer service bars at retail) back in 2007, but patented processes are a whole different beast than calling your service something similar, which Amazon seems brazen enough to do on its end.
Finally, there's the payments business, which Apple is rumored to be planning to get into, possibly as soon as this year with a mix of near-field communications technology and its Apple ID platform. Such a system would let users pay for things besides digital goods using their Apple payment credentials. Here Apple could once again be encroaching on Amazon's turf. Amazon runs its own payments business that works both online and on mobile phones. The company also runs a version for sites that lets customers use their Amazon credentials to make purchases at an online store.
Out of all of these, one of the big ones remains the aforementioned cloud storage and music service, where the ball now sits in Apple's court. Apple could very well come out with something that's completely different and even much better. But if it ends up being mainly a place for people to store files and stream music, then Amazon will have pulled of an impressive feat: making Apple look more like a follower, rather than a leader in the music scene.