Analysis: Amazon's Unlimited Storage No Threat to Cloud Storage Rivals

New plans another sign pricing in the consumer cloud storage space does not matter much

Jason Verge

March 26, 2015

3 Min Read
Jeff Bezos Amazon
Amazon CEO Jeff Bezos at a press conference in Santa Monica, California. (Photo by David McNew/Getty Images)Getty Images

Amazon launched unlimited cloud storage plans. The unlimited everything plan is $60 a year, while unlimited photo storage is $12 a year. Fire device owners and Prime members already had unlimited photo storage. Do these new plans spell bad news for the rest of the cloud storage market?

Pricing for the top storage tier of 1 TB used to run $500 a year. That ceiling has been eliminated and the price slashed. The price cut is drastic, but it doesn’t spell doom and gloom for cloud storage.

Unlimited cloud storage for consumers is a complement rather than the product itself. Amazon wants consumers using Cloud Drive because it basically ensures they are on the Amazon platform. It makes them more likely to purchase digital music and arguably even physical goods, because that consumer is within Amazon. The move isn’t about making consumer cloud storage a profitable product so much as a play for consumer hearts.

Google and Amazon have the data center infrastructure scale to make these low price points work. However, Google Drive and Amazon Cloud Drive could be completely free and still benefit the giants in terms of getting people on their platforms.

There is a cloud storage price war, but of more concern are business-focused storage cost cuts. Google recently fired enterprise cloud storage shots of its own, unveiling cold storage that is a serious competitor to AWS.

IBM SoftLayer caught up with the other enterprise cloud storage product offerings earlier this week, announcing the addition of block storage and file storage to its services.

These can be seen as a competitive threat for the likes of Dropbox and other consumer cloud storage offerings, but most of these offerings have shifted the paid focus to business offerings. The raw storage itself is a commodity – it’s the services and security around storage that businesses pay for.

This is seen in earnings from Box. The focus on calls is business-account progress: investors want to hear the number of paid business accounts, not the number of raw users. Almost all acquisitions in the cloud storage space have gone toward capturing the enterprise market.

Also of note is the group of consumer cloud storage closures leading up to the creation of Dropbox and others. AOL shuttered their consumer cloud storage Xdrive in 2008, as it was deemed unprofitable. That was a much higher price point and AOL had scale.

Microsoft, Google, Dropbox all offer 1 TB of storage for $10 and under a month. In the consumer space, 1 TB is enough for most users. There will be some that really test the ceiling with Amazon, but Amazon won’t run out of space, and it’s cheap for it to operate the very hands-off service.

These price wars can be devastating for other players, but the consumer space does not dictate the health of the business space. A similar price war occurred in the web hosting space, with the rise of cheap and unlimited plans meaning giant web hosters essentially pricing out the competition. It was another game of unlimited chicken – the majority of users don’t need that much capacity. The ones that do are better suited for business offerings with bells and whistles.

The web hosting market has consolidated considerably since and moved away from price as a differentiator. What happened to web hosting is now happening to cloud storage. Amazon isn’t interested in making money on unlimited cloud storage so much as becoming a platform for user content.

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