In arguing that Apple’s (s AAPL) iPad could change the way people consume video, the biggest hurdle to my thesis was that the iPad doesn’t support Adobe’s (s ADBE) Flash, which has become the de facto vehicle for delivering video from a number of popular web sites. How could the device revolutionize online video viewing when it doesn’t support the main way that people currently view video online video?
While you probably won’t be able to stream video from Hulu or Netflix (s NFLX) on the device at launch, I’d argue that the lack of available web video on the iPad (i.e. video delivered in Adobe Flash or Microsoft (s MSFT) Silverlight) is only a short-term problem. That’s because I believe that over the long term, such content — and more — will be made available through iPad apps.
As time goes on, I expect iPad app development to be driven both by consumer demand and by media companies looking to develop new business models. Apple already has a vast — and growing — developer community for the iPhone and iPod touch, and video providers have shown that they will create applications for individual devices, so long as they see a decent user base and a possible monetization strategy.
Roku, for instance, has sold only 500,000 units so far, but there are hundreds of organizations developing apps (or “channels,” as Roku likes to call them) for its broadband set-top box. Same goes for Boxee, which to date has less than a million users for its beta software and hasn’t yet rolled out its hardware device — yet still lays claim to a healthy community of developers that want to get on its platform. Even in the most conservative estimates, Apple is expected to sell more than a million units of the iPad, which means there should be video companies lining up to develop apps for it.
Furthermore, Apple has already proven that its apps can provide new monetization models for content owners. Prior to the iPad launch, much of the discussion about it revolved around how the device could help book, magazine and newspaper publishers create new revenue streams. But the creation of new business models is equally important to video publishers.
Major media companies have long bemoaned the fact that they haven’t been able to monetize their digital assets as well as their broadcast, cable, box office and DVD revenue streams. And while sales of digital apps in the short term may not be a panacea for the slumping TV ad market or weak DVD sales, the iPad app store at least presents the opportunity for paid app or subscription models that weren’t available before.
Major League Baseball’s app strategy is a perfect example of how video publishers have been able to leverage the iPhone — and soon the iPad — to better monetize their video assets. The MLB At Bat app — an updated version of which Apple showed off during the iPad presentation — was the No. 2 highest-selling app in 2009, despite its $9.99 price tag. And many of its users also subscribed to the league’s MLB.tv service, which allows customers to stream live games from a web browser, select set-top boxes (like the Roku player or the Boxee Box) or mobile device for $100 a year.
You could see similar possibilities with the release of a Netflix app, which would extend the brand onto yet another platform and could boost adoption for users that want to take their streaming videos on the go. And if Hulu is really looking to move to some sort of a paid subscription model, as it has long been rumored to be considering, the iPad presents the perfect medium and platform for it to do so.
So, no, video on the iPad won’t be Flash-based. And no, it won’t be “open.” And it probably won’t be free. But providing a means for video publishers to develop new revenue streams on the iPad is probably not a bad thing — even if those revenues are based on a closed system.