It's a little odd writing this topic as the first post on my new game development blog, but considering the flash developers are being extremely vocal and once again spreading misinformation or conveniently ignoring facts I thought I would clear some things up.
Ted Patrick (Adobe's platform evangelist) has been throwing out links and slamming Apple everywhere you look ever since Steve Jobs showed the world the iPad and that it didn't run Flash. It's obviously not going to stop anytime soon either considering this is what Adobe pays him for, but it turns out that much of the content he's linking to is not only bias (which I could obviously understand and would not hold against him) but blatant misinformation.
An example? Today he posted this on Twitter: "Dear Apple, 1984 Called, They Want Their Video Back": http://bit.ly/9uaYok
So I decided to read through the link to hear the argument. To your average reader it might seem like a semi-decent post built on facts, but if you analyze what is being said you can see right away that it is yet another "I didn't do my homework and/or decided to ignore the facts and now I want to rant in favour of my platform" posting.
Unfortunately the author of the blog chose not to approve my comment as the real facts would weaken her position. I realized why my comment was not going to be approved after clicking on "About Me":
"I am a Group Manager, Developer Relations for Adobe"
So let's walk through it here. The article states:
"Pushing as much content through the App Store as possible is great business for Apple; and honestly, I don’t blame them for wanting to build their App Store into a massive (and massively profitable) content juggernaut. It’s far friendlier to their margins than the hardware business, even with their premium pricing, so why not go for a platform play?"
Now I could understand stating a point like this if it were true, but it is horrendously false. The AppStore operates just above break even and gives Apple no meaningful revenue/profit in the foreseeable future. This is public information that is easily gained by listening to the quarterly investor relations conference call by Apple where it has been mentioned numerous times. Considering Apple streams the call live on their site as well as archives it for later listening there is absolutely no reason that anyone on the Internet could not obtain this information.
The AppStore merely exists as a support infrastructure for Apple's hardware that they are interested in selling at margins that retain profitability. So not only is claiming that the AppStore is massively profitable completely wrong; but claiming that the margins are higher than their hardware business borders insanity.
Next she states:
"Where I take exception — and developers should too — is with Apple’s “my way or the highway” approach to development. Adobe’s Flash is a very high-profile victim of this approach right now, but we’re not the first nor are we the only one."
Again she is completely ignoring the technologies and software that is not built the "Apple way" but is available on the AppStore. Novell has MonoTouch which is a .Net implementation allowing C# development on the iPhone. The game engine Unity embeds the Mono runtime to allow for C# development for games on the iPhone. Various other game engines embed LUA and use AOT compiling to run on the iPhone. Apple could have knocked off any one of these technologies or products but instead allows them. Flash can run on the iPhone without a problem just like the rest of these technologies as long as it is compiled to an IPA. So when the author is complaining about Flash it is really "her way or the highway" as she needs it in the browser and not how every other technology is implemented on the platform as an IPA.
But why no Flash browser plugin? First of all people need to understand that the most frequent causes of a crash in Mac OS X (as per the crash reports) was the Adobe Flash plugin, and this was announced at WWDC (you can read more about it here: http://daringfireball.net/2010/01/apple_adobe_flash). Not only has it been rife with bugs causing performance and stability issues over the years, but it has also turned into the new security worry with new vulnerabilities added quarterly and sometimes monthly. This is not only on Mac OS but also on the Windows platform. The worry is no longer what browser you are running, but what plugins have security issues.
On a consumer device or mobile device this is absolutely horrendous as you can't even control the security of your own device! If there are security issues people are not going to look to Adobe but they will be calling the Apple support lines as the average consumer doesn't understand this. I have no idea how other vendors are not considering this fact, although many of them seem to be grasping at straws and wanting to take any "competitive advantage" they can get.
She goes on to state that her 10 year old niece won't be able to play WebKinz and she won't want to play any other games. Although she forgets to mention the fact that as of Flash CS5 Adobe will allow retargeting to IPA, and therefore Ganz could very easily compile a native application and supply it as a free download. Any flash developer will be able to do this and are therefore not restricted from the platform.
So far what we've seen is a very vocal minority hitting the blogs and trying to incite your average consumer into demanding having the flash player on their platform. The fact is that the majority of consumers don't really care at all otherwise the iPhone wouldn't be such a hit (Consumers vote with their wallet not on blogs). Content providers are slowly switching over to HTML5/JS open standards (such as YouTube, Vimeo, and many others) and as long as Apple devices keep selling, more companies will have to offer sites based on open standards due to the growing percentage of people unable to view their content.
Considering these are two Adobe employees spreading misinformation like this do we even have reason to trust them at all? What do they lose if HTML5/JS were to take the place of Flash? Adobe would likely retarget Flash to supporting the HTML5/SVG/JS spec and so you would still get the great content creation tools they are known for. Although they would no longer control the platform which weakens their position immensely.
Disclaimer: I do not hold shares of either AAPL or ADBE. I do not work for either Apple or Adobe. I have no invested interest in either HTML5 or Flash.
16 comments:
I'm not sure that I am following you. Is Flash "supported" or not on iPhone? Is it a big deal or not that Mobile Safari doesn't support the Flash plugin? Are you taking into account Daring Fireball's point that the reason Flash is the most-crashing plugin is also because it is the most popular, and that no one knows if it's crashes-per-run are higher or lower than other plugins?
I guess I don't see a "misinformation" campaign here. Sure Adobe people are biased and if you believe everything their marketing puts out you will be living in a fantasy world. But honestly that's true about Apple, Microsoft, and a lot of other companies, too.
Do you really think HTML5 et al will result in a viable new set of web standards that will make Flash irrelevant? I think that eventually they will get OK but that a single-vendor solution will always be more consistent. Consistency is obviously not the only factor here.
Do you remember when Apple launched the first-gen iPhone and only allowed HTML "applications"? There was a split then, too, between people who thought browser apps were the future, and people who were holding out for real native applications.
Just a note that after this blog posting my comment regarding the financial impact of the AppStore was then accepted on the 1984 blog post.
Ben the misinformation I see was mainly regarding calling the AppStore "massively profitable" which it is not and will never be. It is simply Apple's attempt to create a closed ecosystem for their platform, exactly what Adobe does so I don't see how they could even argue that.
Regarding Flash crashing I did take this into account, but I also take into account the fact that this is a mobile device and not being able to control the crashes and security is very different than the PC. As the smartphone market grows I think we'll see a few of these manufacturers get names like Microsoft had in PCs for crashing and insecurity. Personally flash only kills the browser on my Mac the odd time, I think the real culprit for years was the PDF reader which would kill my browser over 50% of the time. Mind you I've still had a lot of problems with flash.
Regarding HTML5/JS/WebGL only time will tell and so I have no idea. Obviously I would *like* to see this but it is a long hard road and we'll have to see if everyone plays nice. Although I do think we will see a big consistency and even small issues will not matter as much. I don't see why people will be coding from scratch rather than using libraries such as jQuery, SproutCore, etc and the many that are sure to pop up that will handle this. If there are large inconsistencies... that would be a very bad thing but I don't think Microsoft plans on doing that this time :)
Hi Joe,
I appended some info to my blog I'd like to cross-post here:
I do not listen to the quarterly calls but I have done analysis of Apple's annual reports. Apple reports Net Sales by Product but is extremely close-mouthed about profits so anything on the subject is conjecture -- however given the online nature of App Store sales and the significant amount of sales driven theorugh the store I think it's a fair call for me to make.
You're free to disagree with me of course :)
Rachel,
Thanks for your reply and for accepting my comment on the original post.
I took a break from the game industry for a few years and worked in the finance (in engineering) and have been listening to the conference calls and analyzing the annual reports of AAPL, GOOG, ADBE, NVDA and others for quite some time.
I agree they are very close-mouthed regarding almost anything on the subject, but it has been noted on record multiple times that the AppStore is currently operating just above break even operations. So unless Oppenheimer is lying on every conference call then there is no way it could be counted as near "massively profitable".
Quite honestly there is no way that the profit from the AppStore could even come close to rivalling the profit ADBE makes from Flash CS5 development tools. Which is one of the reasons I found the comment of "massively profitable" in bad taste.
You can't honestly believe that Apple plans on never doing more than "break even" on the App Store.
It's a bit naive to say the least. Your argument is basically that they are not making a profit now, and so have no interest at all in doing so in the future...sure...
They've invested heavily in the infrastructure, and now their at the point where they can re-coup those investments, and start generating huge profits.
What do you think the 5 year plan is for Apple? My plan is it probably involves making their hardware more affordable, and offsetting that revenue loss by their already established App Store which requires very little additional investment.
Shawn then quite frankly you think Peter Oppenheimer the Apple CFO is being deceitful on the investor quarterly conference calls. Everyone is entitled to their own opinion but rather than me just guessing how much Apple does and will make from the App Store I just take the information given in the recorded investor meetings.
The iTunes business which they have been running for years has been operating at just above break even. They've had the infrastructure and established technology and storefront for quite some time now. I'm wondering why you think that is any different from the App Store business?
So you do actually do believe that Apple's longterm strategy is just to maintain the status quo? And never make a significant amount of money off of the App Store?
Seems to me it's a potentially massive money maker (note the word potentially ;). Sure, it might not make them alot now, but what about when the iPhone/iPad install base is 10x's what it is today?
I don't even see how this is up for debate. It's a completely closed marketplace, one in which Apple charges a royalty on every item sold. And you honestly expect me to believe that Apple has no interest in protecting that revenue? Please.
Of course if Apple could make a significant amount of money from the App Store they would. It is just that according to the CFO and investor relations it just isn't destined to be right now or in the foreseeable future.
The iPod install base is absolutely huge and iTunes is primarily a closed marketplace, one in which Apple charges a royalty on every item sold.
You skipped around the question in my last post, why is the App Store any different from iTunes regarding revenue? Apple has explicitly stated that it isn't and that they are not pursuing it as a major source of revenue but an asset to help further sell more hardware SKUs.
First of all, the iPhone install base has a TON of headroom. Sales in Q1 2010 showed a 400% increase over sales in Q1 2009. The install base is nowhere near what it will be in 3-4 years.
Secondly, I can think of a couple obvious differences:
1) Not everyone who owns an iPod/Pad will be buying music from iTunes, most people still don't pay for music... However, due to iPod's lack of Flash support almost everyone will be using the App Store, so the potential attach ratio is far higher for Apps.
2) I'd imagine that Apple is getting much higher margin's on the App's they sell for indie developers, rather than Music supplied by Record Labels.
This is a tangential arguments though.
A) it's a large potential source income, and
B) Apple DOES want to protect that income (as would any company).
These are simply the facts. So, the argument stated by the evangelist is a pretty valid one.
Again, this isn't about what they are making now, but what they stand to make in the future (think App Store in 5 years)
Sorry, that's 200% growth since 2009, 400% since 2008. They've essentially doubled, year on year, for almost 3 years running.
http://en.wikipedia.org/wiki/File:IPhone_sales_per_quarter_simple.svg
Actually the year-over-year increase on the iPhone was 100% growth so I'm not sure where you got the 400% number from? The only thing I have seen regarding the iPhone and 400% growth is the percentage growth in YouTube uploads.
1.) Just as you mention that not everyone who owns an iPod/iPad will be buying music from iTunes, a massive number of people still don't pay for their mobile applications (note that many top applications and games claim an 80-95% piracy rate). It is incorrect to assume that almost everyone will be using the App Store as there are many pirate "app stores" that are used quite heavily.
2.) Unfortunately I can't comment on this as Apple keeps these numbers closed for obvious competitive reasons.
Also I am not arguing that it isn't a large potential source of income "in my eyes" and that Apple wouldn't want to capitalize on that. But Apple themselves have come out in logged conference calls stating their intentions and also how the App Store has no significant revenue over break even at the current time. Analysts actually ask the exact question every quarter and Oppenheimer repeats every single time that the App Store is not built for revenue but as a support ecosystem for current and future hardware in order to give them a competitive advantage. If Apple was looking at building it up as a massive source of income they would definitely be stating that on the call.
I don't mean to be rude in any way but that graph shows a pretty static 100% growth rate year over year Q1 since 2008.
Man, total brain fart on the percentages :p Doesn't change the point though, we're still seeing practically exponential growth.
As for pirate apps, I'm sure that exists as well. However, surely far more people know how to download pirated music, than know how to get pirated apps up and running. We've been downloading music as a Society for over 10 years now.
Conference calls, and corporate PR are all well and good, but I'm not going to put in them. Especially quarterly updates, which must be fairly short term analysis anyways. I prefer to use reasoning and critical analysis whenever possible, and there's huge revenue potential here.
Apple doesn’t break out iTunes sales, but lumps them into a category called “Other music related products and services,” which generated net sales of $4 billion last year. That’s an increase of 21 percent over 2008, and the company attributed this growth to “increased net sales of third-party digital content and applications from the iTunes Store.”
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