For Adobe, There Is A Lot More At Stake Than Apple Devices, Here’s The Bigger Story

I don't know about anyone else, but frankly I am getting sick and tired of all the whining that's taking place when it comes to the Adobe and Apple saga. Both companies need to stop making this an issue in the media, stop trying to pitch bloggers on whos side they should take and instead should focus their efforts on their core business.

For starters, don't let the discussion get sidetracked by those who want to imply that Apple is supporting HTML5 out of the goodness of their heart or because they want to support some kind of "open standards". Apple's decision not to support Flash on their devices is purely a business decision and one they have the right to make. Anyone who tries to imply that Apple is being the "Robin Hood" of the industry and is trying to do away with proprietary technology for the benefit of us all is simply wrong.

While Adobe's not happy with Apple's decision, Adobe needs to stop whining about it and adapt their business due to changes that happen in the market. Industries do not sit still, business evolves and any good company evolves with it. While Apple threw Adobe a curve ball, Adobe should stop complaining about the pitch and change their business so they can hit what's thrown to them. And I don't mean by filing a lawsuit which would only help Apple and hurt Adobe.

Adobe has allowed Apple to get under their skin and as a result, given Apple a lot of press. Adobe continues to blog about Apple, mention Apple and complain about Apple. That should stop immediately. Make your point known, outline the facts and then focus on how your business can overcome the problem. Adobe could have diffused the Apple situation but instead, by their actions, have only thrown fuel on the fire. That all plays into Apple's hands, giving them more exposure for a device, the iPad, that has sold half a million units.

While Flash was never supported on the iPhone, we didn't see much of a stink made about it until the iPad came out. Why is Adobe so concerned with the iPad? Even if the device sells 10M units in the next two years, it's not even 1% of all the connected devices on the web. Not having Flash working on the iPad is not that big of a deal for Adobe. It's a much larger problem for Apple since as a consumer, the browsing experience I get on the iPad is terrible. I bought the device from Apple, so they get the blame for that, not Adobe. Now I do realize that the iPhone has a large footprint and unlike the iPad, has real adoption. But that one device alone will not make or break Adobe's business.

The real story here is the ecosystem. Apple does not have one and Adobe does. That's where Adobe has the upper hand and needs to change their way of thinking to combat Apple. For any content that is created and delivered to the iPad, Apple gets nothing in the way of revenue from that ecosystem. Most content owners don't use any kind of Apple software to encode video for the iPad and none of the CDNs that deliver content to the iPad use any kind of server software from Apple. Apple gets no revenue from the iPad ecosystem other than apps specifically written for the platform.

Adobe on the other hand has an entire ecosystem of software for both the encoding and distribution of video on the web, not to mention the player itself. When Apple announced they would support HTTP streaming for the delivery of video in H.264 to their devices, Adobe should have been quick to help CDNs deploy HTTP support for free. Instead, Adobe took their time to come out with HTTP support which won't be officially announced until next month, nearly a year after Apple's support.  Adobe's pitch to content creators should be that HTTP is better than RTMP and if they really like what Apple is doing with H.264 and HTTP support, Adobe can do that as well. While this would not help Adobe get Flash on Apple's devices, it would show content owners the value of Adobe ecosystem for creating, encoding and delivering video. For Adobe, this has to be about the ecosystem and not a one-off device like the iPad.

While it sounds like Adobe still has not made the final decision on how they plan to charge CDNs who support HTTP streaming when they announce it next month, I urge them to not be greedy. In the past, Adobe came to the CDNs and forced them to share revenue the CDNs got from delivering Flash videos over their network. Over time, Adobe did greatly reduce the Flash license fee, but CDNs are still footing the bill for what most of them call a Flash "tax". CDNs adsorb the Flash tax for larger customers but small ones still have to pay more to deliver Flash via RTMP.  When that happens, HTTP will win out. And if a content owner is going to use HTTP to deliver video, then why not do it in H.264 and HTML5 and bypass Flash all together? That's what Adobe should be concerned with.

While Adobe will officially announced HTTP support next month, with Limelight Networks being the only CDN to have it enabled on their network from day one, the two companies are presenting together at NAB this week showing how DIRECTV is the first to support HTTP Flash delivery for the PC, TV and mobile devices. Encode once, delivery everywhere. Adobe needs to fully support HTTP and put all of their weight behind it. So far, they have been slow to bring HTTP support to the market and still talk about it as something they too can do, but have yet to truly embrace it over RTMP delivery. The reason for this is that Adobe has always gotten their revenue from the CDNs thanks to RTMP, but they can't keep that mindset anymore if they plan to fully support and promote the benefits of HTTP video delivery. It also has not helped Adobe that this is one area where Microsoft has made some good traction in the market, since Microsoft has been supporting HTTP delivery for well over year now with their SmoothStreaming technology.

Adobe has been late to the game to support HTTP which is why Akamai went out and built their own technology to support delivery Flash via HTTP, something that I know Adobe did not like. It's also probably one of the reasons why even though Adobe wants to portray it as liking all of the CDNs equally, they are launching HTTP streaming with Limelight and one of Limelight's customers exclusively.

Customers are moving to HTTP delivery and before long, it will be the norm, not the exception. Yet even with those clear signs in the market, Adobe is still thinking of charging the CDNs a license fee to support HTTP streaming. While it would be cheaper than the license fee for RTMP streaming, even with HTTP streaming Adobe still requires the CDNs to have a Flash access server to sit in front of the HTTP delivery to manage licenses. This is a mistake. If Adobe wants to truly combat Apple, they need to get HTTP Flash streaming to take off so that content creators use their software to create and manage the video. That's where the revenue is, especially since only 3-4 CDNs deliver 90% of all the Flash videos on the Internet anyway. Which revenue market is bigger, the CDN market, controlled by 3-4 vendors, or the tens of thousands of content creators?

For Adobe, this approach would require a new way of thinking. For far too long Adobe has stuck to the RTMP story because of the revenue associated with it. But times have changed, HTTP is taking over the Adobe needs to adapt to that change in the market. Adobe should give CDNs the ability to delivery HTTP Flash streaming for free, with no license costs, with no Flash "tax" to content owners and really put their weight behind the benefits of moving to HTTP delivery. They absolutely CANNOT sit on their laurels and say all is fine because xx% of all computers have Flash installed.

The bottom line is that there is a lot more at stake for Adobe than whether or not Flash works on the iPad. That's what the media and bloggers want to talk about, but there is a much bigger story here. Yes, Adobe would lose some revenue from content owners not using Adobe products to generate content for the iPhone and iPad, but they will lose even more once HTTP streaming takes over if they don't throw their weight behind it now.

Adobe is at a very crucial point in their business where they need to change their way of thinking and lay the groundwork for what is taking place with HTTP video delivery. Whether they like it or not, it is going to change the industry and it's not to late for them to use it to their advantage to ensure that their ecosystem survives and grows. If they don't and instead focus their time and efforts on suing Apple, complaining about Apple or not putting 100% of their efforts behind HTTP delivery, I'm afraid they are going to have much bigger problems with their business down the line.

If Adobe wants to respond to this post via their blog, I welcome the reply or they can send me one directly and I will post their response on my blog.