My TEDx Talk about Physical Media and Home Entertainment

Adobe Under Attack

Although commonplace in Hollywood, we very rarely get to see showmanship in the tech industry these days. Some of us younger techies fondly remember the bravado of industry icons like Larry Ellison and Steve Ballmer but lately it seems like the Silicon Valley is overtaken by understated professionalism that leaves many of us uninspired and hungry for a real showdown.

But then there’s Steve Jobs. Never one to disappoint, he’s the last man standing of the Tech 1.0 generation still exhibiting the magnetic charisma we all miss from the nineties-era leadership. And he’s still swinging for the fences, more than compensating for Apple’s defeats in that decade. Just when you thought Techland lost its pulse, at a recent employee meeting Jobs reportedly dropped the software industry equivalent of a WMD on the venerable software company Adobe:

[Adobe is] lazy. They have all this potential to do interesting things but they just refuse to do it. They don’t do anything with the approaches that Apple is taking, like Carbon. Apple does not support Flash because it is so buggy. Whenever a Mac crashes more often than not it’s because of Flash. No one will be using Flash. The world is moving to HTML5.

Those of you who follow tech industry movements will know that Adobe seems to be under attack from several directions right now. In addition to Steve Jobs’ very public castigation, Adobe is taking arrows from Google and Microsoft as well through both company’s public support of HTML5. What’s at the heart of this angst? Essentially this is an all out war to control content, developers and ultimately the consumer. Given that Adobe Flash is today’s primary distribution vehicle for video on the Web, media companies should monitor this battle closely.

The digital media industry value-chain is composed of several key constituents:

• Content (eg, Studios, Game publishers, App developers)
• Platforms (eg, Microsoft, Adobe, Google)
• Devices (eg, Dell, HP, Apple, RIMM, Samsung)

Media companies like a distinct value-chains because its analogous to the home video and broadcast industries whereby media companies make a piece of content, hand it off to distribution platforms that define standards for things like terrestrial broadcast signals, DVDs, etc. Devices are manufactured to conform to these standards so that consumers can enjoy media with the same experience regardless of location or device. Along the same lines, YouTube and Hulu leverage Adobe Flash to reach many millions of PCs and Macs, and similarly Netflix uses Microsoft Silverlight to do the same thing.

An alternative value-chain would be one where the Platform and Device are integrated into one entity. Examples of this exist in the game console market. A game developed for Play Station 3 doesn’t work for Xbox 360 and definitely doesn’t work on the Wii. Although gaming software for each platform may leverage the same title or franchise (eg, EA Sports John Madden Football), more often than not, a game publisher like EA has to develop the content specifically for each console, leveraging technology that is often proprietary to each manufacturer.

Adobe Flash is currently the world’s most robust content development platform. It exists on 97% of all computers, most mobile phones, most game consoles, and even many Internet-connected consumer electronics. Flash enjoys a community of developers that numbers in the hundreds of thousands and all of them enjoy the ability to write with one language (Action Script) to reach any Flash-enabled device regardless of operating system. None of the drawbacks of traditional cross-platform development exist in Flash: Flash apps look great almost all the time because Adobe has a knack for putting only as much functionality in Flash as it needs, never more. That makes the software resource-efficient, user-friendly and easy to install. Although Java has been touted as the open-source, technically superior Flash-killer for many years, Flash thrived because of the strength of its developer community and superior user experience. (More info on that here: http://blogs.zdnet.com/Burnette/?p=286)

So how did Adobe become ubiquitous? By offering a very strong product (technically speaking) and very affordable pricing. YouTube’s founders chose Flash Video to enable their service because everyone already had it installed on their computers, and to deliver video to those computers using a standard Web server (using HTTP), there was no cost to YouTube other than cost of buying the Flash development (CS4) tools for a few thousand dollars. YouTube is the largest video distribution service in the world and although it was valued at $1.6 billion by Google, Adobe only captured thousands of dollars of revenue from that deployment. Is that bad business? No. That’s precisely why so many developers choose Adobe over alternatives, and why Adobe has such incredible ubiquity on the Web.

Alternative to an ubiquitous, cross-platform development environment, the game-console value-chain is very powerful for the device manufacturer if they can get it. It locks the consumer and the content into one proprietary platform that is owned by the device manufacturer. Traditional attempts to build an integrated device and platform have failed because developers and content generally gravitate to the platform that reaches as many devices as possible. Notable failures have been the Sony Betamax that was much more proprietary and expensive to manufacture compared to the VHS-standard for home video which was less rigidly controlled by one manufacturer. In the nineties, the Macintosh failed to the PC because the PCs were cheaper and had more content and application development surrounding the platform.

But what happens when the proprietary device is also the market share leader? Take the iPod for example. Incredible industrial design, product experience and marketing have catapulted the device into 80%+ market share. With dominant share, Apple was poised to create a developer community that is proprietary to Apple products (the “App Store”). The strategy failed when Macs were less than 10% of the PC market, but as the market leader in portable devices, developers flock to submit apps to Apple. Of course Apple is smart to take its proprietary developer community to its other products, the iPhone and now the iPad. You can bet that Apple will take the App Store as far as it possibly can, because for the first time it owns its own the hearts and minds of the developers!

So when Steve Jobs calls Adobe and its product development organization “lazy,” that is unfair and probably disingenuous. He’s a shrewd competitor that doesn’t want to share his company’s crown jewel: a proprietary distribution channel for content and applications. He probably also remembers when Adobe stopped publishing Photoshop as a native application for the Mac in the mid-90s. This was the equivalent of kicking Apple while it was down, and now with Apple rising up clearly the institutional memory is long.

As for Microsoft and Google? By taking aim at Adobe, it appears that each company may want the world to look a bit more like the game console market with 3 dominant, proprietary platforms. Furthermore, HTML5 is a powerful development environment that is non-commercial. Adobe stands between the consumer and Google or Microsoft and therefore exposes each company to risk of being intermediated by competing commercial interests.

Media companies brace yourself: the balkanization Apple, Google, and Microsoft will try to create result in more complexity and drive up the cost of content distribution. It shifts the balance of power away from you and deeper into the proprietary platform-devices.

Make no mistake however, HTML5 is a very solid improvement over its predecessor and will undoubtedly erode some of Adobe’s value proposition. Because its built into the browser, HTML5 will not suffer the user-experience glitches that Java Applets are known-for. However, media companies need the ability to reach consumers on any platform very efficiently, reliably, and securely. If media companies take Steve Jobs’ comments on face value, they’re likely to suffer a pretty rude awakening when they realize Apple’s lock-in isn’t just about the consumer. It’s about content as well, just as Universal Music Group found out when it unsuccessfully tried to muscle Apple out of its one-size fits all pricing model for music. Cross-platform development (when it doesn’t hurt user-experience) is good for the content business, but I have a strong feeling that’s not what Apple wants.

WTF! Congratulations...?

There's a fascinating realtime data set available on Speedtest.net: a huge number of field measurements of broadband speed from around the world. And here's a hearty congratulations to my fellow countrymen in the US. With a 29th place finish, we beat Greece!

The country that invented the Internet beat the country that invented democracy by 200 kbps!

Download Speed

1	Republic of Korea	22.60Mb/s
2	Latvia	19.49Mb/s
3	Aland Islands	18.86Mb/s
4	Japan	17.86Mb/s
5	Romania	16.90Mb/s
6	Lithuania	16.55Mb/s
7	Andorra	15.43Mb/s
8	Sweden	15.27Mb/s
9	Bulgaria	14.92Mb/s
10	Netherlands	14.81Mb/s
11	Republic of Moldova	13.68Mb/s
12	Hong Kong	12.45Mb/s
13	Portugal	11.86Mb/s
14	Ukraine	10.99Mb/s
15	Hungary	10.79Mb/s
16	Slovakia	10.68Mb/s
17	Germany	10.17Mb/s
18	Czech Republic	10.11Mb/s
19	Russian Federation	10.10Mb/s
20	Finland	9.96 Mb/s
21	Switzerland	9.96 Mb/s
22	Denmark	9.38 Mb/s
23	Estonia	9.31 Mb/s
24	Slovenia	8.78 Mb/s
25	Singapore	8.52 Mb/s
26	Belgium	8.39 Mb/s
27	France	8.29 Mb/s
28	Norway	8.28 Mb/s
29	United States	7.98 Mb/s
30	Liechtenstein	7.98 Mb/s
31	Taiwan	7.92 Mb/s
32	Greece	7.80 Mb/s

A Free Market (libertarian) View on Net Neutrality

My parents left India at a time when an autarkic socialist regime actively antagonized entrepreneurs and left hundreds of millions of people in poverty. That’s mostly why they (and millions of others) left India in search of economic opportunity in places like Hong Kong, Singapore, Dubai, the UK, the US, etc. I'd venture to guess that most of the Indian diaspora, some 24 million people worldwide, took place between 1950 and 1990 when the Indian regime was its most heavy-handed. A general distrust of government-intervention in economic matters is still pronounced among the Indian business people worldwide, but my guess is that Indian expatriates who left for the professions or with technical degrees are more motivated by racial issues than liberal economic values (by the way, nice work, Mr. President, and thank you for the Diwali message!). Theories on the political leanings of the Indian Diaspora are a topic for another blog post.

I've been trying to clarify my stance on Net Neutrality in light of a general desire for less government intervention in our lives. The Silicon Valley (whether it recognizes it or not) is philosophically libertarian. We take pride in our self-sufficiency, capital efficiency, lack of regulation, and fairness to employees, unlike numerous industries dependent on corporate welfare to stay afloat, and labor unions to protect the rank-and-file. When the going gets tough, we fix it ourselves, and very rarely turn to the government for help... much to the chagrin of polticians who will always try to fill campaign coffers with Silicon Valley money.

So is it possible to be simultaneously a proponent of Net Neutrality and Free Market Capitalism? Most right wingers would argue that Net Neutrality is a huge encroachment on the property rights of the ISP industry. Furthermore, they worry whether it invites further regulation of the Internet in the future. But given the obvious fact that the Internet has become so essential to people for their jobs, education, and entertainment, is it really possible to deny that a neutral, fair, and open network is in the consumer’s interest? ISPs have been pretty darn neutral over the last 15 years, and it has been in their interest to be so with data subscriptions generating tens of billions in new revenue streams. A neutral network is definitely the reason the Internet we know and love exists (at least according to those who built the Net).

Putting Neutrality in practical terms, if a website you load, video you stream, or file you download was degraded in performance without warning, where would you take your customer service claim? Do you call the Website provider? The ISP? The manufacturer of your PC or router? The publisher of your operating system, firewall software, or browser?? The Internet as a packaged experience is truly miraculous when you consider how many layers of technology and services exist to simply load a website. Fundamentally, what people really want is disclosure. We want to know if the ISP, which is the most invisible layer in the “Internet stack,” is responsible for an improved or degraded experience for any of the services we use.

As consumers, how could we desire anything less than a fair and open Internet? Analogously, we’re in favor of clean food in our restaurants, functional planes in our airlines, low-emissions from our cars, clearly marked lanes on our toll roads, and stock brokers who don’t lie about the value of our 401ks. The debate lies in how we achieve these outcomes from the private sector. And if we’re being sensible, how can we achieve these outcomes using the Government as little as possible? After all, I don’t think anyone really loves the idea of using the legislature to settle disputes when there are more responsive/efficient mechanisms available, right??

Disclosure, and clear Rules of the Game are good for everyone. Entrepreneurs whose ingenuity has driven the Internet thus far desperately need more clarity. Ambiguity is not a good thing for entrepreneurs because it scares off investment. The FCC could do start-ups a great favor by clarifying what our country’s broadband policy actually is. That will usher in new confidence and investment for entrepreneurs that are desperately looking for ways to finance their ideas in a tough economy. But before the Government has a chance to do anyone any favors, why don’t ISPs proactively do it themselves? Everyone around them is asking for the same thing, so why don’t they respond??

When Comcast tried network management procedures that inhibited BitTorrent transfers in 2007, consumers had a very negative reaction to the practice. The public outcry compelled Comcast to change policies, but ultimately no government action was needed because Comcast responded to the market. The free market prevailed mostly because the people “injured” by Comcast’s network management policy (ie, YOU) are probably the most passionate, the most informed group of citizens in the world. You are extremely focused on this issue, and you have ample means to scream bloody murder if you are not happy (through blogs, youtube, twitter, etc).

Outside of the BitTorrent/Comcast incident, it’s difficult to cite any major confrontations requiring new laws and regulation. Most proponents of Neutrality are mostly fearful of bad behavior in the future. Imposing punitive measures to enforce Net Neutrality seems premature and even unnecessary in my opinion. Not being a policy maker, I will characterize my personal views in broad strokes, again striving for as little regulation as possible:

• I think the activists, regulators, and law-makers in this area would be wise to define what we want from the ISP industry and couple those things with rewards (eg, tax breaks) rather than penalties.
• Furthermore, ISPs should figure out a way to self-regulate through some non-governmental, Self Regulatory Organization that collectively publishes guidelines for network management, discloses the practices of its membership, and praises/rewards its membership for investments made to improve the Internet experience.

If the ISPs proactively embraced Net Neutrality (since they’re pretty much already neutral, anyway), and then figured out a way to self-police, wouldn’t the need for new laws pretty much dissipate? Analogously, the securities industry self-polices itself with the NASD/FINRA. Couldn’t an equivalent non-governmental, SRO be formed to handle these matters before ever escalating to the FCC? The subscription TV services (MSOs, telcos, and DBS providers) have banded together in the TV Everywhere initiative... Seems like the right stakeholders are already at the table. They should just nip this issue at the bud.

A lot of folks worry whether Net Neutrality, if implemented, will open the door for further regulation. I am less concerned about that if Neutrality is implemented with positive reinforcement. Or better yet, if ISPs working through a new industry group can evaluate the “ask” we have as consumers, and choose to take it or not. If ISPs reject the tax break, either we’re asking too much or not giving them enough. Surely an ISPs shareholders would love the new-found cash flow in an economic climate like this, and if the “give” is what they’re giving us anyway, everyone’s happy!

And what the color scheme should be.

I grabbed this snapshot from the latest BoConcept catalog because it was pretty close to the color scheme our designer came up with. Maybe less fancy/highend materials, but we won't be far off from the overall look.

Whuddya think??