I have been following with great interest the recent and very public battle between Apple and its long-time ally Adobe. Concern over Apple’s behaviour has now escalated to the point where Reuters has reported that regulators are mulling an investigation to determine if Apple is in violation of antitrust laws by requiring that its programming tools be used to write applications for the iPad and iPhone. It has subsequently been reported that Apple is attempting to avoid an antitrust probe into its trade practices by revising some of the terms of its developer agreement. It is unclear at this time what those changes might be.
The whole fracas started when Apple suddenly altered its developer agreement to disallow the running of applications created using cross-platform compilers on the iPhone and iPad platforms. Adobe was in the final stages of development and was apparently only four days away from the release of CS5 Suite for development of Flash for the iPhone and iPad when the announcement was made. This caused Adobe to scrap work to bring Flash apps to the iPhone and iPad. This is not just some lover’s spat between two companies that were once close allies. The battle has in fact become very bitter and very public with people like Adobe evangelist Lee Brimelow stating in his blog: “Go screw yourself Apple”. In response to the vitriol being directed at Apple from Adobe and members of the development community, Steve Jobs made a rare blog entry on the Apple site Thoughts on Flash where he raises six issues or reasons for not supporting Flash on the iPhone and iPad. His position focuses primarily on performance, security and user experience. The rationale provided is specious at best and blog entries like this one from Jesse Warden’s Steve Jobs on Flash: Correcting the Lies steps through Jobs’ posting and bluntly categorizes it as 13 lies and one half truth. For what it’s worth, Warden does go on to state that he agrees with the balance of Jobs’ post.
While Apple is publicly trying the take high road on this by stating that it is all about the customer and the user experience, Apple itself has certainly faced its own quality and security issues including a recent OS X update to fix 88 security holes. Neither is everyone enamoured of Apple and the Apple Experience as Hunter Kressel illustrates in this entertaining YouTube video Why Macs Suck. Developers unhappiness is now fomenting as evidenced in a recent TechCrunch post Apple Gives Adobe The Finger With Its New iPhone SDK Agreement where the author states “If it wasn’t abundantly clear before, it certainly is now: Apple is playing dirty. It doesn’t care what the developer community thinks.”
It seems somewhat ironic that Apple was saved from a near-death experience by the suite of creative applications Adobe provided for the Mac, and a $150 million cash infusion from Microsoft as well as a commitment from Microsoft to continue producing the Office suite for the Mac platform. To add to the irony, Microsoft’s purported reason for investing in and ensuring the survival of Apple was to help quiet the noise about Microsoft’s supposed anti-competitive practices.
What has been curious to me is that we have so far heard no mention of Microsoft’s Silverlight in all of this. Adobe Flash certainly has far greater mind and market share, but Silverlight is advancing rapidly on what was once Adobe’s exclusive territory. My read on Apple’s position is that for the same reasons, Apple will also block Silverlight from running on the iPhone and the iPad. Both Flash and Silverlight are browser based technologies that provide excellent platforms for the distribution of Rich Internet Applications (RIA) and are capable of delivering functionality and end user experiences comparable and even equal to that of native iPhone and iPad applications. Like Flash, Silverlight runs in a variety of browsers including Firefox, IE, Safari, Chrome, as well as on a range of operating systems including Mac OS X, Windows, Linux (with Moonlight), FreeBSD and Symbian. It is also part of the foundation of Windows Phone 7. Silverlight is rumoured to soon be available for Android and the BlackBerry operating systems. Waiting in the wings there is also JavaFX which like Silverlight, is a cross platform competitor to Flash. JavaFX, however, was late to the party and is struggling to gain market and developer acceptance.
Follow The Money
I believe that the true rationale for Apple’s non-support of Flash (and supposedly Silverlight) is much simpler than the quality issues or open standards ideal espoused by Jobs. As I see it, there are essentially two reasons for blocking Flash, and they both come down to the same primary motivation. To discover the answer, simply follow the money.
Reason Number 1:
The Wall Street Journal recently reported that iAd will cost up to $10 million for initial placements in June. Regular placements will be $1 million. Standard fees for equivalent mobile ad placements are in the $100,000 to $200,000 range. Apple thus plans on charging at a minimum five to ten times the going rate for standard placements and 50 to 100 times the going rate for the June placement. The math on this is pretty simple: If Apple can sign 100 companies for that initial placement in June, that’s $1 billion dollars in ad revenue – that’s billion with a “B”. As Flash is one of the most widely used technologies for delivering ad content over the web, it is most definitely in Apple’s best interest to simply eliminate the competition by locking out Flash and keeping the ad revenue completely to itself. The beauty of this for Apple is that there is virtually no to cost Apple – they simply shut out the competition.
Reason Number 2:
The App Store has become a cash cow for Apple. As of April 10, 2010, there were approximately 185,000 applications available on the App Store, and more than 4 billion downloads. Many of the applications are free, but for the ones that are not free, Apple takes a 30% cut with the balance going to the author of the application. Flash, Silverlight and JavaFX are all capable of delivering essentially the same functionality to the iPhone and iPad as what is possible through native iPhone applications. Applications delivered using these technologies are all cross-platform meaning that if they run under Windows, they will run on a Mac, under Linux and eventually on Android and BlackBerry smart phones. Because they are not native iPhone and iPad applications and they are delivered to devices via a web browser, they do not have to be acquired through the App Store. If such full featured applications providing the same functionality as Native iPhone and iPad applications can be obtained outside of the App Store, any software vendor could sell their applications directly to their customers and not pay Apple the 30% toll. With 4 billion downloads of Apps from the App Store and the download rate edging ever closer to 1 billion per month, Apple has an overwhelmingly strong motivation to circle the wagons to protect its territory by preventing competitors from circumventing the App store. The only way to do that is to prevent Flash, Silverlilght, Java, and JavaFX and other technologies from running on the iPhone and iPad.
So What Does This Mean
Corporations exist for only one reason: they exist to increase the value of the company to its investors. That’s it. In this respect, Jobs and Apple have done and continue to do a spectacular job. Corporations also have a public responsibility to play fairly and not unreasonably stifle competition. This is why the government is now interested in Apple. Microsoft ended up in a massive legal battle in an attempt to prove that they were playing fairly. Although they managed to pretty effectively dodge the legal bullet, the litigation was a major distraction that took Microsoft’s eye off of the ball. Innovation in the company and consequently in its products suffered. Microsoft’s reputation was also damaged. These two things helped put wind in Apple’s sails. If Jobs is smart, Apple will pay attention to the lessons Microsoft was forced to learn or it may find itself suffering a similar fate.
Whether or not Apple ends up facing any legal challenges related to non-competitive practices remains to be seen. In a society where Americans are more loyal to brands than the company they work for, the Apple brand seems unassailable. It also looks like Apple is using its brand equity to increase shareholder equity by reducing both consumer and competitive options. Jobs’ hubris may be his undoing here, and the shine may soon be coming off the Apple. Irrespective of any potential action by regulators, the balance of the industry needs to significantly step up its game. The industry needs to innovate and ensure that at a minimum Flash and Silverlight are as widely supported and accepted as possible – especially on mobile devices like BlackBerry, Symbian and Android based smart phones. Further, a robust application developer community must be aggressively promoted so the there are hundreds of thousands of applications and billions of downloads that run on any platform without developers needing to create a specific version for each. This is the promise that products like Flash and Silverlight can deliver. Platforms such as BlackBerry, Android, Symbian and even Palm will succeed if the development community sees how it can profit by reaching a wider audience by making cross-platform Flash or Silverlight applications instead of single platform iPhone/iPad applications.
In the end, everyone will follow the money.