It's quite an interesting business decision to jump into this market. Take Zencoder for example (which is one of my favourite players in this field)... if you are to compare the prices with say Zencoder [1] AWS is much more cost effective (by several factors). Even if you were operating at scale and spending $2000 per month with Zencoder, you would only get 50,000minutes worth of HD Video. (You pay 2 minutes worth of…
I'm not so sure I'd be worried. Amazon has certain advantages in the market. But they are not into handholding at all. I think you can easily out-compete them on ease of use, support, and community. You can also do much better marketing, and make much more interesting partnerships.
I also think Amazon's massive scale constrains them some; they can't be as flexible. In Zencoder's shoes, I'd be looking to see if I could get a pricing advantage through specialized hardware that covers my base computing load. I've see people drop their AWS bills by a factor of 10 when a good sysadmin designs a workload-specific setup.