Flash has obviously been very beneficial to them in the long run. It has given them the only remaining well-controlled proprietary piece of the web. This helps them sell their IDE, and more importantly, gets their brand out there.
Now, I'd argue that these goals have now been accomplished. Adobe is well-entrenched in web history, and everyone knows what Flash is. However, the relevance of Flash is clearly declining, due to HTML5, and stigma and disgruntlement is increasing. This means they will get less and less sales of their IDE and their name will fizzle out.
Imagine for a second that they open sourced the Flash player. Just the player. Suddenly it would no longer carry such a stigma with Linux, it would be easy to include in distros, developers would contribute fixes and make it more efficient on hard-to-support systems. It would literally stretch out its life-time as a product, and keep Adobe's name on the web.
I argue that Flash has played out its role for Adobe, and if they open source it now it could only benefit them. I did not think this was true in the past, and I think it will not be true in 5 to 10 years when HTML5 has surpassed Flash adoption in the most important venues. However, right now I think it would benefit them immensely.
There also seems to be a sentiment from some of the comments here that they are losing interest in maintaining Flash, so opening it to the community would seem to make some sense. If the "standard" ends up evolving in any way, they'd always have a head-start in their IDE support, since it will easily remain ahead of the curve.
So one might say they should open source the core of Flash, the JIT compiler and virtual machine, and not the parts that are licensed. And you're right, that would be the correct move! They did that in 2006: http://en.wikipedia.org/wiki/Tamarin_%28software%29
They also open sourced the Flex SDK: http://opensource.adobe.com/wiki/display/flexsdk/Flex+SDK
What Adobe needs is a completely new product that is available to consumers for free, has it's source code public and free from patents. This way, Adobe tools can still be sold and used to develop, while the player is ubiquitous and as widely spread as possible. And that's what they're trying to do with HTML5: http://www.adobe.com/solutions/html5.html
Adobe's communication to developers is bad. No one knows about any this. Technology isn't their problem, marketing is.
EDIT: Make link a link :-)
The fact of the matter is that if Flash had opened itself up earlier, there wouldn't even be an HTML 5 Canvas/WebGL as we know it, people just would have used and extended Flash and Adobe would still be making bank on their commercial IDE for the environment. Now Adobe's dominance is threatened and Flash is universally despised.
Adobe is obviously terrible at maintaining the runtime so I think the only logical explanation for their lack of OSS Flash Player is that they have some very prehistoric business guys somewhere along the way that don't understand open-source at all and choke this off in terror every time it gets mentioned.
So here are my questions for Adobe:
Is there still income from Flash Player licensing? If not, how does keeping the Player closed source help your business interests?
Is it the client side DRM you have in place in the Player that's stopping you from making it open source?
Do you not have the resources to communicate with the community that would develop around an open sourced player (knowing that you would have spend some time to justify many things that exist in the codebase to maintain backwards compatibility)?
Are you concerned that a rival would clone some of the technology you developed and implement it in their proprietary player (e.g. MS, but they already gave up on Silverlight)?
Would the sudden influx of new security patches as vulnerabilities are discovered and fixed potentially compromise the performance of the Player?
Are you worried that individuals with malicious intent will find new vulnerabilities and exploit them?
What are your other concerns that are preventing you from open sourcing the Flash Player?
Google pays lots of money for Adobe to auto opt-in Flash installs with Chrome.
My understanding of that arrangement is that it is a mutually beneficial relationship that guarantees that Chrome users have the latest version of Flash (and Chrome is thus more secure) and the Flash Player update adoption happens faster. It makes very little sense to me that Google would pay Adobe for that since Adobe benefits just as much as Google.
Now how much money this brings in, who knows.
Note that this is NOT the same as Flash being bundled with Chrome. This is Chrome being bundled with Flash.
Streaming video will work just fine with HTML5 or just an old fashioned browser video plugin. A lot of the Flash web games will be missed, but my sense is that the vast majority of those people are using Windows and Mac.
The day is coming when very few new projects will be started in Flash and it will go the way of Silverlight.
So technically the code is Open Source but each distributor must get a patent license... that is restricted to redistributing binary form only.
(I deliberately did avoid the use of the word Free Software, as this actually might not be true if the code is licensed under the Free Software license GPL).
"Free Software" vs "Open Source" would not be relevant here, since both FS and OS would view this "you-still-need-a-patent-licence" clause as incompatible with FS & OS.
There are a few bits in the new GPLv3 that say "if you release under GPLv3 then you have to give everyone a patent licence". However I don't know how that works if you don't have a full patent licence…
There are existing open source implementations of H264. Even the best encoder (x264) is open source. But I guess there are license issues with third party code/libraries used in Flash.
It's a shame that a complete clean room open source implementation (e.g. x264) might still be illegal to use in some territories.
Sounds like what Oracle did with OpenOffice.org. Dumping it on the Apache Foundation and all that.
This is an effort to render SFW inside the browser.