If Amazon & Netflix start becoming full-on competitors, it would seem to make Netflix's use of AWS a little awkward. I wonder if Netflix will regret the decision to move more and more of their infrastructure into Amazon's hands.
If Netflix hasn't put DRM on their stream, someone monitoring the pipe could easily get the zeitgeist of what movies are being streamed.
Um, ever tried to stream Netflix video from anything that wasn't running the latest Silverlight? Or diverting/capturing the video from the stream, even on an authorized client?
That's why there's still no Netflix client for Android or Linux, and why Netflix probably doesn't have to worry too much about content sniffing.
In fact Amazon are going to be more careful about dealing honestly with Netflix. If they spy on / interfere with customers on their cloud service because they might be competitors they are going to attract government intervention and lose a lot of customers.