Adobe & Microsoft: The Big Web Video Battle to Come

Written by R. Scott Raynovich - Light Reading

Tuesday, May 5. 2009 at 09:30 AM EDT 9 comments

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Competition is the best catalyst for innovation, and nowhere has the competition been as fierce as in the market for streaming video. We can expect this to accelerate as Adobe Systems Inc. (Nasdaq: ADBE) and Microsoft Corp. (Nasdaq: MSFT) gear up for what is likely to be a whopper of a battle in the Web video segment.

Why's that? Wrapping up NAB a little over a week ago, it become clearer to me than ever that this rivalry is heating up.

Microsoft sees video as a key part of its new Silverlight platform, which was designed for building interactive Web applications, and it's upgrading accordingly. At NAB, Microsoft announced the general availability of its "smooth streaming" technology, which adds an adaptive bit-rate feature that dynamically alters the video delivery depending on the bandwidth available.

Adobe has made its own moves, including adding its own adaptive bit-rate technology. It also announced at NAB that it will be pushing its Flash format as an embedded component on many consumer electronics devices.

I'm not forgetting Move Networks, which also had news at NAB. Move bought virtual set-top box provider Inuk Networks in a bid to widen its reach to more content networks.

Move gained a lot of momentum early, becoming a pioneer in bringing broadcast-quality TV episodes to the Web, which I called the "Quality Revolution." Move deserves credit for pioneering its adaptive bit-rate approach and integrating that with advertising, catering to a list of traditional media clients that weren't just interested in making nice video, but also wanted to try to make money.

Move's not out of it, but I think its recent cutbacks indicate how hard it's going to be for the company to maintain its turf against two Goliaths with deeper pockets. Move's also in the somewhat awkward position of having Micrososft as an investor. It's more likely to be an acquisition candidate.

The real long-term battle is coming between the larger companies with huge resources: Microsoft and Adobe.

Adobe's Flash player has a dominant position on the PC. With 98 percent penetration, according to some estimates, Flash is essentially the de facto standard for streaming Web video and advertising.

Many folks cite this as the reason they think Microsoft is wasting time with Silverlight, but I think that's naïve. Microsoft, as always, sees this as a protracted war for development mindshare, rather than just straight format dominance. Microsoft realizes that in a few years, video is going to be a component of everything that's done on the Web, and it wants in on the action.

While Microsoft is trailing in the online video market, especially when it comes to advertising and Web video formats, the company has shown in the past that when it commits to a new market it can spend many years -- and billions of dollars -- pounding away until it makes progress. Take a look at its efforts in databases, IPTV, Web advertising, and gaming (the Xbox). It's now using Silverlight as a key tool in the competition for Web development and video tools.

"Never bet against Microsoft in a format war," Marty Roberts, VP of marketing at thePlatform Inc. , told Contentinople at NAB. Roberts should know -- he was at RealNetworks Inc. (Nasdaq: RNWK) during the last battle, when Microsoft usurped Real's position as the leading online video technology.

Adobe executives have been polite and sometimes even reverential, in speaking of the Microsoft efforts. As the incumbent in the market, Adobe's marketing strategy has been to focus on building on the large following it has in the development and design community.

The challenges for Microsoft are obvious: Get enough Silverlight client installations to get the ball rolling, without a direct integration with the operating system, which could raise antitrust issues. Microsoft's made some clever moves on this front, including helping to build the Playboy magazine archives to drive adoption. [Ed. note: Check your workplace Web policies before going there!]

One element working in Microsoft's favor, some experts say, is that video services using Silverlight can be delivered over HTTP, which means publishers and service providers can deliver video from commodity, off-the-shelf Windows server boxes, without having to build out a separate video server infrastructure just for streaming.

"[Basing it] on HTTP is really good," Suzanne Johnston, marketing manager with Microsoft partner Akamai Technologies Inc. (Nasdaq: AKAM), said in an interview at NAB. "We're excited to support the new Microsoft streaming solutions."

But Johnston is careful to point out that Akamai is going to remain agnostic and support both platforms. "We're also seeing huge adoption of Flash."

Mark Kapczynski, an entrepreneur who has extensive experience with Microsoft (having sold them a company), says that the software giant is committed to Silverlight for the long haul and is making progress. Kapczynski is excited enough about the opportunity that he's started a new company, Silverflash, which helps convert Flash-based video into Silverlight.

"First off," Kapczynski says, "It's not just about Web video. It is about a complete interactive experience on the Web that includes video, animations, advertising, and more."

Kapczynski points out that Silverlight is a wide-ranging platform designed for building both video and interactive Web applications. He notes that Microsoft has made progress on the video and interactive Web fronts, but it needs to make more inroads with animation and advertising, where Adobe is firmly entrenched among Web designers.

"For Microsoft to win this battle, they have to provide all of the Flash capabilities -- and then some," Kapczynski says. "Microsoft has to provide the complete solution. The more gaps in the solution, means the more Flash proponents can fight off Silverlight progress."

Jeff Whatcott, VP of marketing at video platform company Brightcove Inc. , says similar things. He points out that Adobe has gained market share by improving the quality of video streaming while at the same time boosting adoption.

"The historical tradeoffs were between reach, quality, and security," Whatcott says. "It used to be that you could only have two. Adobe is making that a thing of the past."

When asked how he sees the competition between Adobe and Microsoft brewing, Whatcott smiled cautiously: "It will be interesting. I would say you have to keep in mind their agendas."

The agendas are patently obvious: Adobe wants to sell more development and design tools; and Microsoft wants to sell more Windows servers.

But it's also more strategic: Both companies see the future in selling all manner of tools and software plaforms for interactive Web applications, video, animation, and design. And while Microsoft has Silverlight, Adobe also has Flex, a development platform it's trying to expand -- which is probably more analogous to Silverlight than Flash.

It's not bad news, if you are a media company or a consumer of Web media. With both companies pushing the market forward, Web video innovation is likely to accelerate in the next few years, whether it's coming from Adobe, Microsoft, or a startup like Move. And, as a result, Web video is going to become cheaper, more pervasive, and of higher quality than ever before.