I've been watching the storage industry for years as a hobby-passion. Adam pretty much hit all the major points. The storage space is still open for disruption but is hard with high risk. It's not like building a website. You need serious funding for hardware. You need people to manage the hardware. You need complex software to manage the data and ensure security. One serious breach early on and you're done. Competin…
Also you need to host infrastructure software that knows where your data is sitting, how to deal with provider failures, how to efficiently route requests, etc. which means yet-another-thing-to-configure.
Finally, if the volume of data you're storing is so expensive on S3, I have to wonder why you have all this non-revenue generating data stored in the first place. Processing it also seems more expensive now because the free bandwidth you get from EC2S3 won't apply in the Frankenstore model.