Coopetition describes a recently modern phenomenon where organizations both compete and cooperate, which is also known as cooperative competition. A recent example is how the Netflix streaming platform has been among the major customers of Amazon AWS cloud infrastructure, while Amazon Prime has been among the competitors of the Netflix Prime content platform.
The Netflix case study
As highlighted on the Amazon AWS website:
Online content provider Netflix can support seamless global service by using Amazon Web Services (AWS). AWS enables Netflix to quickly deploy thousands of servers and terabytes of storage within minutes. Users can stream Netflix shows and movies from anywhere in the world, including on the web, on tablets, or on mobile devices such as iPhones.
Netflix never built its own data centers (today, Netflix is mostly hosted on Amazon AWS).
Amazon AWS infrastructure and architecture, which hosts Netflix’s content platform
Why didn’t Netflix build its own data centers?
In reality, Netflix is focused on providing great content and building its brand through that.
That is why, in these years, we’re assisting the “mediafication” of Netflix, and I won’t be surprised if in the coming years, at a certain point, produced content investments will pass the licensed content investments.
- Coopetition: Coopetition refers to the phenomenon where organizations simultaneously compete and cooperate with each other. This term describes a modern business practice in which companies maintain both competitive and collaborative relationships with one another.
- Netflix and Amazon AWS: An example of coopetition is the relationship between Netflix and Amazon AWS. Netflix, a major customer of Amazon AWS, relies on AWS’s cloud infrastructure to support its streaming services. However, Amazon Prime, which offers its own content streaming platform, competes with Netflix’s content platform.
- Netflix’s Infrastructure Choice: Netflix chose not to build its own data centers and instead relies heavily on Amazon AWS to host its streaming platform. This decision allows Netflix to focus on content creation and brand-building, leveraging Amazon’s robust cloud infrastructure.
- Business Model and Revenue: Netflix operates on a subscription-based business model with different plans offering access to streaming content. As of 2022, Netflix had around 230 million paid subscribers worldwide. Its revenue in 2021 surpassed $29.6 billion, with significant operating and net income.
- Content Strategy: Netflix started producing its own content under the Netflix Originals brand in 2013. This strategic move has become a vital asset for the company, helping it differentiate from competitors and drive subscriber growth.
- Airline Alliances:
- Star Alliance: Comprising airlines like Lufthansa, United, and Air Canada, these competitors collaborate to provide passengers with extensive route networks and shared benefits.
- SkyTeam: Airlines like Delta, KLM, and Korean Air form part of this alliance, allowing passengers to seamlessly transfer between member airlines.
- Oneworld: American Airlines, British Airways, and Cathay Pacific are among the members, offering passengers a global network of flights.
- Automotive Industry:
- Toyota and BMW: Collaborated on hybrid technology development to improve fuel efficiency and reduce emissions in their vehicles.
- Ford and General Motors: Competing American automakers occasionally collaborate on projects like jointly developing a new generation of automatic transmissions.
- Pharmaceutical Research:
- Consortia: Various pharmaceutical companies cooperate in consortia to fund and conduct pre-competitive research in areas like cancer treatment and drug discovery.
- Clinical Trials: Competing pharmaceutical companies may collaborate on clinical trials to evaluate drug effectiveness more efficiently.
- Technology Standards:
- Industry Standards Groups: Tech giants like Microsoft, Apple, and Google participate in industry standards groups (e.g., W3C for web standards) to ensure interoperability and promote common technologies.
- Open Source Projects: Companies like IBM, Microsoft, and Google contribute to open-source projects, fostering innovation while sharing code with competitors.
- Movie Theaters:
- Movie Distributors: Competing theater chains cooperate to negotiate favorable terms with film studios for exclusive movie releases, ensuring a broader audience for blockbusters.
- Agricultural Seed Industry:
- Licensing Agreements: Seed companies like Monsanto and DuPont Pioneer enter licensing agreements to share genetic traits, enabling them to develop competitive seed products.
- Sports Apparel:
- Sponsorship: Nike and Adidas often compete for athlete endorsements and sports team sponsorships but may sponsor the same athletes or teams.
- Satellite Launch Services:
- Commercial Space Launch: Companies like SpaceX and Arianespace provide satellite launch services to each other’s customers, expanding their market reach.
- Financial Services:
- Shared ATM Networks: Banks collaborate by creating shared ATM networks, allowing their customers to access cash at a larger number of ATMs without fees.
- Retail Partnerships:
- In-Store Sections: Retailers like department stores may host dedicated in-store sections for competing brands’ products, offering customers a wider selection.
- Software Development:
- Cross-Platform Compatibility: Competing software companies often cooperate to ensure their products are compatible across different platforms (e.g., Microsoft Office on Mac and Windows).
- Network Sharing: Telecom companies may collaborate on infrastructure sharing to reduce costs and expand coverage, especially in less profitable rural areas.
- Food and Beverage Industry:
- Co-Branding: Competing fast-food chains may create co-branded menu items for a limited time, attracting customers from both brands.
- Fashion Industry:
- Collaborative Collections: Fashion designers from rival brands may collaborate on limited-edition clothing lines to generate buzz and attract new customers.