Amazon (NASDAQ:AMZN) has launched a new salvo at rivals Apple (NASDAQ:AAPL) and Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) in their ongoing war for the living room: The e-commerce giant is banning the sale of Apple TV and Chromecast devices on its site. But while Amazon is well-known for aggressive competitive tactics that have been widely successful over the years, it looks like the online retailer has made a mistake with this decision.
According to BloombergBusiness, Amazon sent an email to its marketplace sellers informing them of its decision to stop allowing that sale of the competing streaming devices, which takes effect on Oct. 29. The official explanation is that some consumers were getting confused between all the options when looking for a streaming device, and that Apple TV and Chromecast "don't interact well" with Prime Video, which it now considers a major selling point for Amazon Prime.
However, you don't need a Ph.D. in astrophysics to distinguish between Fire TV, Apple TV, and Chromecast. In any case, the right solution for that problem would be educating consumers and providing clearer information, not banning competing products from its store. At the end of the day, Amazon's explanation sounds more like an excuse, and not even a very creative one.
With the holiday shopping season starting soon, and considering that both Apple and Alphabet have recently launched the latest versions of their streaming devices, Amazon seems to be making this decision based solely on competitive reasons; Amazon is well-known for its relentless competitive drive.
At bottom, this is all about ecosystems and strategic dominance. Consumers are increasingly cutting the cord and choosing streaming services over traditional cable. The trend is especially strong among millennials, a key demographic group, and everything indicates that online video will be a crucial battleground in the war among the three tech titans in the coming years.
This is not the way to go
Amazon sells e-book readers from rival companies such as Barnes & Noble, yetthis hasn't stopped its Kindle line from being a major success. If Amazon really wants to beat the competition in hardware, it should focus its energy and resources on delivering more value to customers, rather than flexing its retail muscle.
It's hard to tell which company stands to lose the most from Amazon's move. The online retailer will lose the revenue from sales of Apple TVs and Chromecasts, and this is unlikely to be balanced by a corresponding surge in the sales of Fire TV devices. Apple has a remarkably loyal customer base, a strong website to sell its products, its own retail outlets, and a big presence in other retailers all over the world, so it has more than enough strength to push Apple TV with or without Amazon's help. Alphabet lacks that distribution system, so it's possible the impact of Amazon's decision will be more relevant to Chromecast sales.
Still, we are talking about three of the biggest corporations in the planet, and streaming device sales are almost insignificant for the three of them from a financial point of view, so Amazon's announcement will not move the revenue needle much for any of them.
From a strategic perspective, Amazon is running a considerable risk here. If Apple and Alphabet decide to retaliate -- for example, by removing Amazon's shopping app from iOS and Android devices -- things could get much more serious. It seems like Amazon has more to lose than Apple and Alphabet from a full-blown ecosystem war.
Even worse, Amazon's move is hurting consumers by limiting their choices and product availability, and this is one of the worst things the company can do. Amazon is first and foremost a retailer, so taking care of customers in its retail business should be its top priority.
The main reason why Amazon has been able to crush its rivals in retail over the years is not because it was focusing on competitive dynamics, but because it has delivered an amazing service to customers. In the words of Amazon CEO Jeff Bezos: "We're not competitor obsessed, we're customer obsessed. We start with what the customer needs and we work backwards."
In a nutshell, the decision to ban Apple TV and Chromecast goes against Amazon's culture and long-term success strategy, so it doesn't look like a smart move from the online retailer.
Andrés Cardenal owns shares of Alphabet (A shares), Alphabet (C shares), Amazon.com, and Apple. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon.com, and Apple. The Motley Fool owns shares of Barnes & Noble. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.