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Apple War on Adobe Risks Losing Developers and Customers

Last week when Apple (AAPL) announced iPhone OS 4.0, it also slipped some new terms into its app developer agreement aimed at Adobe (ADBE). Developers would not be allowed to use tools that let them create apps for one platform -- like Flash -- and convert them for the iPhone and iPad. The timing said it all, as Adobe was about to release tools that would let people take Flash applications and make them available on Apple's mobile platform. But while Steve Jobs may hate this longtime partner enough to play rough, some important customers and developers may find that he doesn't care about them, either.

Apple's refusal to let Flash anywhere near the iPhone and iPad is a potentially serious blow to Adobe's long-term product and business strategies. Adobe has admitted as much in its most recent quarterly filing with the SEC. That's obvious. What appears on second and third thought is the damage that Apple will do to both app developers and to its core audience of creatives -- people who work in photography, graphic design, fine art, writing, video, and film.

I suggested last week that Apple is essentially inviting a class action law suit by developers on the basis of antitrust and restraint of trade. It's one thing to insist on standards of user interfaces and to reject apps for your web store sometimes cryptic reasons. It's another to not only forbid developers from selling their products though anyone else, but to dictate to them what tools they may or may not use and how they will actually write applications.

That action is beyond setting technical specifications. Through the terms, Apple becomes a quasi-employer that controls how app developers do their work and, effectively, makes it more difficult for them to create and sell software for multiple handsets. If some class action lawyers don't have a field day with this, I could see the IRS having some fun. Are app developers truly independent businesses, or would tax codes let the IRS classify them as employees?

Tao Effect blogger and software developer Greg Slepak posted that he emailed Jobs about the term changes and that Apple's CEO responded, pointing to John Gruber's post about the situation. Jobs said that Apple thought that Gruber was insightful and didn't see what he wrote as negative. But the point of the post was that Apple wanted to lock developers into the iPhone OS platform and turn the app store into a de facto platform:

That's how Microsoft became Microsoft. At a certain point developers wrote apps for Windows because so many users were on Windows and users bought Windows PCs because all the software was being written for Windows. That's the sort of situation that creates a license to print money.
Apple doesn't want another platform that could become the standard and keep Apple from locking in developers and the customers that come with them. Straightforward enough, and I largely agree with Gruber's analysis, though you have to wonder whether Jobs also noticed this:
So from Apple's perspective, changing the iPhone Developer Program License Agreement to prohibit the use of things like Flash CS5 and MonoTouch to create iPhone apps makes complete sense. I'm not saying you have to like this. I'm not arguing that it's anything other than ruthless competitiveness. I'm not arguing (up to this point) that it benefits anyone other than Apple itself. I'm just arguing that it makes sense from Apple's perspective -- and it was Apple's decision to make.
Gruber does go on to say that there's no change for iPhone developers, and I'd disagree with that. Any time you tell developers how they should work, you limit technical and business choices that might be valid and useful. Although many developers want to sell their software to iPhone and iPad users, eventually many may give up. Some are already, and others are considering pulling their products off the iPhone.

The problem for developers may be clear, but how do the new Apple developer terms affect customers? Forget for a moment that more time and energy in development probably means higher prices for some software. Forget that disaffection among developers could translate into a loss of existing or potential applications for the iPhone OS.

After all, there are, what, 150,000 apps already available? Who would notice a few that disappeared? Or even a few thousand? Gruber thinks that the terms changes might enforce development standards and mean better quality choices for users. That may or may not be true, though as some iPhone developers have said to me, you can write code as badly without the tools that Apple prohibits as with them.

But forget the iPhone and iPad. Instead, look at the Mac. If there is one vendor that is indispensable to those in the creative occupations, it is Adobe, not Apple. The company is the market leader with products that are hugely important in print, electronic media, and the web. And Apple is telling the company to go take a hike. Indirectly, then, it's telling an important segment of its Mac users to also take a walk. That is a shot across the bows of the customers, as well as of Adobe.

Frankly, I don't think Apple cares. As I've said before, Apple is shifting its focus from the core Mac audience to a more general consumer electronics one. And Adobe hasn't walked away. The company releases its new product versions today for the Mac as well as Windows. Currently Adobe says that it would not consider pulling products from Mac OS X.

But how long will it stay put if Apple continues trying to destroy at least one of the Adobe product lines? There is always Windows, and although a lot of people in the creative arenas would hate the idea of leaving a Mac, I don't think they could afford to give up on Adobe tools.

Image: Erik Sherman