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There was an interesting development in the Apple (NASDAQ:AAPL) vs. Adobe (NASDAQ:ADBE) Flash War this week. Adobe decided to discontinue development of tools for making Flash apps for the iPhone family of devices. This may not sound like a big deal, but it is.

Ninety-eight percent of desktop and laptop computers (including Macs) can run Flash video and other Flash apps. Most modern, Web 2.0-ish, multi-media sites incorporate some kind of Flash programming. Even though this is true, Apple has decided to make it almost impossible to display Flash video and apps on their iPhone, iPod Touch and new iPad devices. (The reason you can view YouTube on your iPhone is because YouTube uses H.264, an Apple-compatible format, not Flash when you access it from your iPhone.) You can Google the details of the fight; they are interesting, but the details are not the overarching issue.

Sell ‘em the razors, sell ‘em the blades. It sounds so simple and it is. Apple’s model is unique. They are a hardware company that gives away free software to enhance the value of their devices. But, as you well know, they do much more. They have created a tool set that empowers thousands of third-party developers to help them sell their products. But - and it’s a big but - they have not created an open platform. It is entirely under Apple’s control, and quite closed.

I am fascinated by the rhetoric in the blogosphere about open vs. closed platforms. Apple has the absolute right to limit, prohibit, edit, fix or otherwise augment anything that third-party developers create under the terms of Apple’s software development agreement. This is Apple’s ecosystem, not ours.

The simple argument for Apple’s position is that, unlike open platforms, apps developed under their strict guidance will have the highest level of quality control and offer the best user experience and consistency.

Cut away the selfishness shrouded in altruism and you find a company that earns only eight percent of the hardware dollars in its industry, but earns 25 percent of the profits. The Apple model works for Apple … that’s how it was designed.

The reality that the Apple vs. Adobe war brings into focus is the murky and unfortunate future of connected devices. If you look at the spirit of the FCC’s new “100 Squared” plan (the name they have given the Commission’s recommendation to Congress for the National Broadband Plan), you can imagine a future where there are only two kinds of devices: connected and not-connected. This imagined future has nothing to do with the Internet, Net Neutrality or private ecosystems. It is a world where you can buy any device and it will either connect or it won’t.

If you buy a digital toaster, or a lawnmower, or a garage door opener, or a mobile device, or an app phone, or a car … it will either connect or it won’t. Awesome. Sadly, Adobe’s decision to “give up” on trying to interoperate with Apple throws a pail of ice water on a universally connected future. It demonstrates, in a very specific way, why we will never live in a truly connected world: there are simply too many conflicting agendas and business models.

The magic of television is that it is a national standard. If you buy a television set, it will tune in television signals. This is true no matter where you live. Free, over-the-air, cable or satellite images will all display (within a baseline of quality parameters) for everyone, everywhere.

Internet Television, online video, websites, IP-based content … not so much.

If you don’t think this is a problem, consider this. There are about a billion PCs in the world and about four billion mobile devices. These numbers will grow. Media consumers (that’s you and me) have demonstrated a new behavior over the past year that I like to call, “best available screen.” Simply, people will watch any length content on the best screen available. If you can’t watch Star Trek in a movie theater or on the 60″ flat screen in your living room, you will be quite happy to watch the entire movie on your laptop or even your mobile phone … people are now more than willing to watch any length content on the best screen available.

This is in stark contrast to the behavior that I call the proportional screen model, where people watched short content on small screens and longer content on bigger screens. 2-3 minute clips on a cell phone, ½ hour and 1 hour shows on television sets and theatrical motion pictures in theaters.

The best available screen behavior is a paradigm shift and, as a society, we will never look back. Why? We have been trained to expect instant gratification.

What does it say about our connected future that we can’t experience more than half the online video content on iPhones, iPads or other Apple devices? Apple won’t budge. Adobe is powerless and has given up. Not the outcome consumers were hoping for.

I can easily argue both sides of the Apple / Adobe war and my question is, as I said, purely rhetorical. The answer is that we are about to enter a world with three competing models: Apple, Microsoft (NASDAQ:MSFT) and Google (NASDAQ:GOOG).

Apple will sell hardware and give you tons of free software. Microsoft will sell you software and won’t care what you run it on, and Google will give you everything for free and sell advertising to support it. Each of the three will try to lock you into its ecosystem.

As for our connected future, the winner in the Apple / Adobe war is Apple. The loser is not Adobe; they are going to do just fine. The loser is our interoperable, connected future … sad, but completely understandable.

Disclosure: No positions

Source: Apple vs. Adobe Flash War: Winners and Losers