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Apple iPhone Creates Own Developer Industry

Stocks in this article: AAPL NFLX ATVI

BOSTON ( TheStreet) -- It's official: Apple's (AAPL) newest iPhone is on the way. Fan boys can now sleep tight with visions of HD video dancing in their heads.

Yesterday's Apple conference in San Francisco featured cool new functions of the iPhone 4, many of which are bells and whistles to help it keep up with Google's (GOOG) Android operating system and Research in Motion's (RIMM) BlackBerry smartphones. Among the hoopla, one thing was clear: Developers are the key to the success of the iPhone and iPad tablet. Those devices are, in turn, a gold mine for developers.

Big names from online video-rental store Netflix (NFLX) and video-gaming company Activision (ATVI) stood on stage with Apple Chief Executive Officer Steve Jobs to promote their apps on the iPhone, gaining access to a huge audience of customers.

Inclusion in Cupertino, Calif.-based Apple's App Store won't make those companies, but it gives them a shot in the arm. The ability to stream Netflix movies to an iPhone may seem silly because the smartphone's screen is so small, but it serves as a cool feature that could push people to subscribe to Netflix. For a company that's at the tipping point as Netflix is, every bit helps.

Activision, too, gains access to a fantastic platform to sell simple-to-develop games that can milk every cent from successful franchises such as Guitar Hero. With the addition of a gyroscope to the iPhone, developing games for the device is becoming easier and allows designers to create immersive experiences that can boost app sales to big numbers.

While this sounds great for developers, it's important to consider the pitfalls as well.

Apple controls the distribution in this format, so what Steve Jobs says, goes. That means that if you cross Cupertino, you may find yourself on the outside looking in. Being cut off from this media market could prove to be a damaging, if not fatal, prospect.

Consider Adobe (ADBE).

As a developer of some of the most widely used and pivotal technologies around, it's hard to imagine that Apple would want to shut the company out of its devices. But that's exactly what happened with Adobe's widely used Flash code. Apple didn't like that it's a closed system, so it simply decided not to support it.

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