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A week ago marked a change in my personal technology… I bought an Apple Inc. (NASDAQ: AAPL) iPad.  This is my first ever Apple device purchase.  The iPad is an entertainment device that allows a little more relaxed web access or personal media access that does not feel like the same ‘at the desk’ experience so many workers in America want to get away from on weekends and nights.  But there is a serious flaw and one that will keep many away from buying the device if they are active internet users.  This war with Adobe Systems Inc. (NASDAQ: ADBE) is a silly one, and Steve Jobs is running the risk of driving away some of those who are more geared toward Windows that are interested in moving from PC to Mac.

Even with the Adobe battle,  Apple still has a great reputation in the tech world.  Yet, Microsoft Corporation (NASDAQ: MSFT) could be accused of the same issue over Linux interoperability in the past, but if Steve Ballmer had announced that Microsoft was going to drop Flash interoperability rather than Steve Jobs there would be tech riots.  We have seen the reports of Flash issues and understand that there are some interoperability issues, but what Apple is forcing change in is in programming for many websites out there.  Not hundreds.  Thousands upon thousands, even though Steve Jobs in his letter went out of his way to explain how many big sites have gone his way.

If you read financial, technology, travel, entertainment and leisure, and many other types of websites, the NO FLASH issue is very problematic.  Adobe obviously needs to work through technical issues, but Apple also needs to stop this childish ‘you are out of the club’ snub.  The financial industry also has a history of not having many applications work on non-Windows devices including Macs.  If Steve Jobs ever wants a next major leg up, he needs to court this market.  Arguably, it is interoperability which helps convert the hold-outs.  Jobs also needs to stop being a baby about which standards will not be allowed.  In fact, Jobs could even declare a drop-date that give Adobe time to catch up rather than being on the path it is on.

Steve Jobs has outlined that this is more of a technical decision rather than a beef with the company itself.  Jobs effectively said that Adobe has just not made Flash in a manner that is technically good enough in its specifications in a world of touchscreen devices that are geared around low power consumption.  Rather than use Flash, Apple has adopted HTML5, CSS and JavaScript, and claims that these are all really open systems compared to Flash; and it created WebKit.

There is a problem in Apple’s stance in that it is effectively keeping many websites that have been on the web for years from having their sites and content viewable.  Many web designers and publishers are not likely to just suddenly adopt yet one more tool so that Apple video and graphics can be viewed on iPhones and iPads, particularly as so many publishers and developers have only recently learned the tools they were using as is.  The longer Apple keeps a standard as widespread as Flash out of its tablet will only make the company seem more and more like the Microsoft attitude of ‘my way or the highway’ that consumers had to sludge through during the 1990’s.

Another big issue is advertising on websites.  Many websites have Flash advertisements.  With Apple keeping Flash dark, they are making it less and less viable for content creators because fewer and fewer ads are there for display on a content website.  Most consumers will cheer this because most people dislike advertising.  That s a content creator’s bread and butter though on the new internet where subscriber services are having to retool to compete in the world of free.

There is a huge issue here of precedent.  Letting Steve Jobs think this is OK is an endorsement for him to drive out other common web standards.  If Steve Jobs wins this war against Flash, what is to keep Apple from turning on any or every other development standard as Apple sees it’s market share growing.  This could even go as far as keeping many new users down the road from converting from Windows-based products to Apple.  Starting with an iPhone or a an iPad is an easy decision for many.  Making the full all-in Apple switch is not as easy.  Nor as cheap.

Lastly, this may make Steve Jobs suddenly ‘too corporate’ and too heavy-handed.  It could even come across as more Gates-envy.  There is an obvious double standard out there because Apple is thought of as the cool club.  The Mac versus PC commercials worked.  Still, Mac has almost no real share in the enterprise market.

The WSJ reported last week, citing unnamed sources, that the FTC and the DOJ have tried to figure out which agency would review charges by companies like Adobe and by Google Inc. (NASDAQ: GOOG) that they are effectively  being barred from real access (and monetization) in the rapidly growing iPhone and iPad applications.  Go ask Bill Gates how fun it is being known as a heavy-handed player in a technocratic-dictatorship once Uncle Sam and other regulatory bodies in and out of the U.S. can be.

We are for more open systems with more interoperability.  We are for what is best for consumers.  And in the world of corporate greed and bashing excess profits, it should be at least thrown out there that Apple now has a capital arsenal of almost $42 billion. It should be up to you to decide whether Jobs has your best interest in mind or whether he is ultimately just taking another short-cut at adding cash to that near-$40 billion cash arsenal of Apple.  Jobs has said that Flash is more of a drain and poses more of a security risk.  Simple… Make those of us who want Flash sign a digital disclaimer before downloading Flash showing that we accept that there is a greater security and performance risk.  This is the world of disposable low-cost and ‘good enough” computing.

In the last quarter, Steve Jobs said that revenues rose 49% and PROFITS rose 90%.  He also showed that gross margin was 41.7%, up from 39.9% a year before.  In the quarter Apple sold 2.94 million (+33%), sold 8.75 million iPhones (+131%), and 10.89 million iPods (-0.1%).  As of the end of May, Apple said its first 60 days yielded 2 million iPad sales and supplies in the physical stores are still extremely limited today.  If you add up the $18.5+ billion in Long Term Investments with the $10.018 billion cash and equivalents and the $13.137 billion in short-term investments, then Steve Jobs and friends have a capital arsenal of nearly a whopping $42 billion.

Maybe someone just needs to come up with an iPad and iPhone iFlash hack-app.  We gave a copy of Jobs’ letter below but we would like to know what you think.  Take our survey:

[polldaddy poll=3375190]

-JON C. OGG

Steve Jobs said in his letter in April:

Apple has a long relationship with Adobe. In fact, we met Adobe’s
founders when they were in their proverbial garage. Apple was their
first big customer, adopting their Postscript language for our new
Laserwriter printer. Apple invested in Adobe and owned around 20% of
the company for many years. The two companies worked closely together
to pioneer desktop publishing and there were many good times. Since
that golden era, the companies have grown apart. Apple went through
its near death experience, and Adobe was drawn to the corporate market
with their Acrobat products. Today the two companies still work
together to serve their joint creative customers – Mac users buy
around half of Adobe’s Creative Suite products – but beyond that there
are few joint interests.

I wanted to jot down some of our thoughts on Adobe’s Flash products so
that customers and critics may better understand why we do not allow
Flash on iPhones, iPods and iPads. Adobe has characterized our
decision as being primarily business driven – they say we want to
protect our App Store – but in reality it is based on technology
issues. Adobe claims that we are a closed system, and that Flash is
open, but in fact the opposite is true. Let me explain.

First, there’s “Open”.

Adobe’s Flash products are 100% proprietary. They are only available
from Adobe, and Adobe has sole authority as to their future
enhancement, pricing, etc. While Adobe’s Flash products are widely
available, this does not mean they are open, since they are controlled
entirely by Adobe and available only from Adobe. By almost any
definition, Flash is a closed system.

Apple has many proprietary products too. Though the operating system
for the iPhone, iPod and iPad is proprietary, we strongly believe that
all standards pertaining to the web should be open. Rather than use
Flash, Apple has adopted HTML5, CSS and JavaScript – all open
standards. Apple’s mobile devices all ship with high performance, low
power implementations of these open standards. HTML5, the new web
standard that has been adopted by Apple, Google and many others, lets
web developers create advanced graphics, typography, animations and
transitions without relying on third party browser plug-ins (like
Flash). HTML5 is completely open and controlled by a standards
committee, of which Apple is a member.

Apple even creates open standards for the web. For example, Apple
began with a small open source project and created WebKit, a complete
open-source HTML5 rendering engine that is the heart of the Safari web
browser used in all our products. WebKit has been widely adopted.
Google uses it for Android’s browser, Palm uses it, Nokia uses it, and
RIM (Blackberry) has announced they will use it too. Almost every
smartphone web browser other than Microsoft’s uses WebKit. By making
its WebKit technology open, Apple has set the standard for mobile web
browsers.

Second, there’s the “full web”.

Adobe has repeatedly said that Apple mobile devices cannot access “the
full web” because 75% of video on the web is in Flash. What they don’t
say is that almost all this video is also available in a more modern
format, H.264, and viewable on iPhones, iPods and iPads. YouTube, with
an estimated 40% of the web’s video, shines in an app bundled on all
Apple mobile devices, with the iPad offering perhaps the best YouTube
discovery and viewing experience ever. Add to this video from Vimeo,
Netflix, Facebook, ABC, CBS, CNN, MSNBC, Fox News, ESPN, NPR, Time,
The New York Times, The Wall Street Journal, Sports Illustrated,
People, National Geographic, and many, many others. iPhone, iPod and
iPad users aren’t missing much video.

Another Adobe claim is that Apple devices cannot play Flash games.
This is true. Fortunately, there are over 50,000 games and
entertainment titles on the App Store, and many of them are free.
There are more games and entertainment titles available for iPhone,
iPod and iPad than for any other platform in the world.

Third, there’s reliability, security and performance.

Symantec recently highlighted Flash for having one of the worst
security records in 2009. We also know first hand that Flash is the
number one reason Macs crash. We have been working with Adobe to fix
these problems, but they have persisted for several years now. We
don’t want to reduce the reliability and security of our iPhones,
iPods and iPads by adding Flash.

In addition, Flash has not performed well on mobile devices. We have
routinely asked Adobe to show us Flash performing well on a mobile
device, any mobile device, for a few years now. We have never seen it.
Adobe publicly said that Flash would ship on a smartphone in early
2009, then the second half of 2009, then the first half of 2010, and
now they say the second half of 2010. We think it will eventually
ship, but we’re glad we didn’t hold our breath. Who knows how it will
perform?

Fourth, there’s battery life.

To achieve long battery life when playing video, mobile devices must
decode the video in hardware; decoding it in software uses too much
power. Many of the chips used in modern mobile devices contain a
decoder called H.264 – an industry standard that is used in every
Blu-ray DVD player and has been adopted by Apple, Google (YouTube),
Vimeo, Netflix and many other companies.

Although Flash has recently added support for H.264, the video on
almost all Flash websites currently requires an older generation
decoder that is not implemented in mobile chips and must be run in
software. The difference is striking: on an iPhone, for example, H.264
videos play for up to 10 hours, while videos decoded in software play
for less than 5 hours before the battery is fully drained.

When websites re-encode their videos using H.264, they can offer them
without using Flash at all. They play perfectly in browsers like
Apple’s Safari and Google’s Chrome without any plugins whatsoever, and
look great on iPhones, iPods and iPads.

Fifth, there’s Touch.

Flash was designed for PCs using mice, not for touch screens using
fingers. For example, many Flash websites rely on “rollovers”, which
pop up menus or other elements when the mouse arrow hovers over a
specific spot. Apple’s revolutionary multi-touch interface doesn’t use
a mouse, and there is no concept of a rollover. Most Flash websites
will need to be rewritten to support touch-based devices. If
developers need to rewrite their Flash websites, why not use modern
technologies like HTML5, CSS and JavaScript?

Even if iPhones, iPods and iPads ran Flash, it would not solve the
problem that most Flash websites need to be rewritten to support
touch-based devices.

Sixth, the most important reason.

Besides the fact that Flash is closed and proprietary, has major
technical drawbacks, and doesn’t support touch based devices, there is
an even more important reason we do not allow Flash on iPhones, iPods
and iPads. We have discussed the downsides of using Flash to play
video and interactive content from websites, but Adobe also wants
developers to adopt Flash to create apps that run on our mobile
devices.

We know from painful experience that letting a third party layer of
software come between the platform and the developer ultimately
results in sub-standard apps and hinders the enhancement and progress
of the platform. If developers grow dependent on third party
development libraries and tools, they can only take advantage of
platform enhancements if and when the third party chooses to adopt the
new features. We cannot be at the mercy of a third party deciding if
and when they will make our enhancements available to our developers.

This becomes even worse if the third party is supplying a cross
platform development tool. The third party may not adopt enhancements
from one platform unless they are available on all of their supported
platforms. Hence developers only have access to the lowest common
denominator set of features. Again, we cannot accept an outcome where
developers are blocked from using our innovations and enhancements
because they are not available on our competitor’s platforms.

Flash is a cross platform development tool. It is not Adobe’s goal to
help developers write the best iPhone, iPod and iPad apps. It is their
goal to help developers write cross platform apps. And Adobe has been
painfully slow to adopt enhancements to Apple’s platforms. For
example, although Mac OS X has been shipping for almost 10 years now,
Adobe just adopted it fully (Cocoa) two weeks ago when they shipped
CS5. Adobe was the last major third party developer to fully adopt Mac
OS X.

Our motivation is simple – we want to provide the most advanced and
innovative platform to our developers, and we want them to stand
directly on the shoulders of this platform and create the best apps
the world has ever seen. We want to continually enhance the platform
so developers can create even more amazing, powerful, fun and useful
applications. Everyone wins – we sell more devices because we have the
best apps, developers reach a wider and wider audience and customer
base, and users are continually delighted by the best and broadest
selection of apps on any platform.

Conclusions.

Flash was created during the PC era – for PCs and mice. Flash is a
successful business for Adobe, and we can understand why they want to
push it beyond PCs. But the mobile era is about low power devices,
touch interfaces and open web standards – all areas where Flash falls
short.

The avalanche of media outlets offering their content for Apple’s
mobile devices demonstrates that Flash is no longer necessary to watch
video or consume any kind of web content. And the 200,000 apps on
Apple’s App Store proves that Flash isn’t necessary for tens of
thousands of developers to create graphically rich applications,
including games.

New open standards created in the mobile era, such as HTML5, will win
on mobile devices (and PCs too). Perhaps Adobe should focus more on
creating great HTML5 tools for the future, and less on criticizing
Apple for leaving the past behind.

Steve Jobs
April, 2010