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Commentary: Macromedia Acquisition Solidifies Adobe’s Position
Posted May 4, 2005 Print Version     Page 1of 1

When Adobe announced its plans to acquire Macromedia prior to NAB, many attendees expected at least a significant announcement of collaboration would be made during the show's run. Instead, each booth, separated by almost a quarter mile, was abuzz with new technologies that advanced each company's value for its customers.

Much has been written about the impending acquisition, and conversations with show attendees tended to veer toward the "Adobe-Macromedia scorecard." The general consensus was that Dreamweaver would outlive GoLive, Illustrator would trump Freehand, Fireworks would fizzle in the face of the industry-dominant Photoshop, and Flash would merge into Acrobat (or vice-versa, depending on which product a particular show attendee liked more).

Little was said, though, about the acquisition's potential regulatory hurdles, the inevitable cultural clashes, and whether this acquisition is a pre-emptive move to consolidate a bullet-proof, Windows-based suite of creative tools that will compete with Apple's digital hub strategy and increasingly unified digital media workflow.

Adobe faces potential regulatory hurdles in three areas—Web development, illustration, and photo manipulation tools. In the latter two categories, a combined Adobe-Macromedia effectively eliminate all competition, since no other market competitor comes close to the combined market share of Illustrator/Freehand or Photoshop/Fireworks. In the Web development category, while Adobe might argue that it must acquire a robust Web development tool to round out its Creative Suite, the Macromedia acquisition will mean that Adobe has acquired two of the three dominant Web development tools in the last six years (it acquired GoLive, then called GoLive CyberStudio, in 1999). Even with GoLive's lackluster competitiveness against Dreamweaver, it will be difficult for Adobe to argue that Microsoft's FrontPage acts as enough of a dominant competitor in the professional Web development space to ward off regulatory inquiries into the web development software landscape.

Even if Adobe's acquisition clears regulatory hurdles, the cultural issues facing any merger or acquisition will inevitably be exacerbated in the Macromedia acquisition. The Adobe of five years ago, which still was focused heavily on the creative industry, might have been able to argue for a good "marriage of equals" that would successfully clear the cultural hurdles; the Adobe of 2005, though, under CEO Bruce Chizen, is unabashedly focusing on the corporate market, shoehorning Acrobat, Premiere and PageMaker into corporate tools. This corporate focus, added to the fact that Adobe is the acquirer, may cause some of Macromedia's brightest engineers to question whether they signed on to "work for the man" to this extent. Adobe must pay as much attention to mending the impending cultural rifts caused by the acquisition as it does to the financial picture and Wall Street's acceptance.

Finally, Adobe's "love/hate" relationship with Apple, especially in recent days under Chizen, and Adobe's move toward a Windows-centric approach on several flagship products, fuel speculation that the Macromedia acquisition may be a pre-emptive strike against Apple's heavy push into several of Adobe's categories. Final Cut Pro, formerly a Macromedia product, has been a runaway success for Apple, which has a history of introducing very low-cost digital media products that compete with other companies' equivalent mid-level products (e.g., Keynote, Pages, iDVD, iMovie).

The list of competitive Adobe-Apple products also spills into professional market:

  • Cool Edit Pro, acquired by Adobe and rebranded as Audition to compete against Avid's low-end Digidesign ProTools LE, has been blindsided by the introduction of Soundtrack Pro, which now directly competes with Avid's higher-end ProTools TDM systems at a price point equivalent to Audition
  • Adobe released Encore, a DVD creation tool, as a Windows-only product in direct competition with Apple's DVD Studio Pro, which emerged from Apple's acquisition of Spruce. Even after Apple eliminated the Windows version of Spruce's DVD product, opening an opportunity to compete directly with DVD Studio Pro, Adobe failed to price Encore at DVD Studio Pro's sub-$500 price.
  • Adobe's Premiere, the precursor to Apple's Final Cut Pro, is a classic programmer's story of squandered opportunity. Premiere's principal architects wanted to completely overhaul Premiere, but Adobe's interest lay elsewhere at that point. The programmers started on Final Cut, a product that was ultimately acquired by Macromedia, where it languished for years despite significant industry buzz, before being acquired by Apple. 

With last week's introduction of Tiger (OS X 10.4), Apple has embedded multi-layer photo- and video-manipulation technologies right into the operating system; combined with the recent introduction of Motion 2, which works with some Photoshop and After Effects products, it's easy to see that Apple's moves may both undercut Adobe's success on the Macintosh platform and hasten Adobe's move toward solidifying an equally robust suite of programs on the Windows platform.

Whether or not the Macromedia acquisition completes Adobe's master plan for a strong bench of Windows products in the one area where Apple lags behind—Web development—remains to be seen, but this skirmish in the digital media wars will surely provide plenty of conversation starters. The Macromedia acquisition also yields Flash video, a hidden gem that will bolster Adobe customers' ability to acquire, edit and deliver video-based content all within a single provider's suite of software products.

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