May, 2013, Adobe made a bold announcement. Beyond Creative Suite 6.0 (it’s current, flagship product), it will no longer provide packaged versions of software. In short, you will not be able to buy a shrink-wrapped boxed Adobe product off the shelf.
This is big news coming from one of the Top-10 software vendors in the world.
Launched a year ago, Adobe will now drive it’s software business through the subscription-based service, called Adobe Creative Cloud (ACC, About). Creative Cloud, or simply CC, is to become Adobe’s central hub for all-things-Adobe in your life. You will purchase your software there, download it, collaborate with colleagues (if you work as part of a team), and store files there.
What Adobe is doing, is finally driving users from periodic purchases of perpetually licensed (buy once, own forever) software, to a subscription model, where you own nothing, but pay regularly.
Before we delve further, let’s discuss what this means for the average user and how their software will work: No big change. You will still install software on your desktop, storing files locally, and saving them to CC (hosted on Amazon Web Services, AWS) if you wish.
The change is in how you pay for the software.
Let’s look at why this change is important, for Adobe, and then for consumers.
Customers (big and small) tend to buy their software on an as-needed basis. They may wait for the next ‘Big R.’ Or, if the big release doesn’t have anything of interest, they may wait a release or two between purchases.
Such cyclic purchase cycles create financial stress for the vendor. It makes them very dependent on major releases to drive annual revenue. And, charting their revenue quarter-by-quarter, it makes their financial picture look bumpy, unstable.
By moving to a subscription model, Adobe hopes to smooth out its revenue stream. Instead of a single quarter (just after the Big R’s release) generating an out-sized proportion of annual revenue, the chart will become smooth, stable, predictable. It makes CEOs and CFOs breath easier, economists feel better about their predictions and in turn stock performance is better.
One side note, the subscription model makes software piracy, a source of lost revenue, almost impossible.
For You, the Consumer
What this means for you depends on the type of consumer you are. If you are a Studio with a large number of Adobe product users (regardless of specific product) this can be good news.
There are a couple basic reasons. First, software purchases can be expensive. A standard license of Creative Suite (CC’s predecessor) lists for $1,299. As a business, this needs to be treated the same as any other major capital asset purchase (e.g. company truck). You pay cash for it up front, but then you need to depreciate the asset’s value over a number of years.
For the CFO and Accounting, this simply adds to their workload and is yet one more line item when tax time comes. This becomes more complicated when multiple users are purchasing software sporadically throughout the year (e.g. providing software for new hires).
For larger consumers, software subscriptions make it easier to eliminate cashflow spikes. The problem mirrors what the software vendor faces. The consumer’s CFO also wants predictability, to smooth out cashflow spikes, and in turn make forecasting and stock performance perform better. Instead of grappling with big purchases, now they simply pay a monthly bill to cover all their users. Makes planning (budgeting) easier. And, the expenses can be 100% written off in each year’s taxes; no carry-overs.
For smaller, individual consumers, the value of CC will strictly depend on your own situation. In particular, how many individual Adobe products do you use, and how often do you upgrade.
The individual Creative Cloud subscription will include full access to the family of CC products (see List). The annual plan is $49.99/month or about $600/year.
If you regularly upgrade your software, or plan to purchase multiple products each year, a $600/year expense can be a screaming deal compared to list price purchases of $1,000, $2,000 or more.
However, if you are a small one-person studio, or a hobbyist photographer only using one or two products, this may feel like swallowing a bitter pill. A perpetual license of Adobe Lightroom currently costs $149. After Adobe’s forced-change to Subscription-only software access, you will now pay $600/year for the same software. That, is a very, very tough pill to swallow.
Here’s the kicker: Once you’re committed to subscription, if you cancel your plan, you lose the ability to use the software (you have to connect to Adobe periodically to confirm continued usage).
Of course, the argument is, “…but you can use all their software for no additional expense!” For some, that’s great, if you have desire and time to learn it (most, are not a simpleton’s tools).
What’s this mean to you?
Following the money, it really depends on your own situation. If you use a lot of their products, this may prove a good deal. If not, it’s not.
It would be easy for some to say how terrible Adobe is for doing this. Do not. Instead, note their change as a harbinger of things to come. This is the direction the entire software industry is heading. You see it increasingly in mobile apps. Now with engineering, finance, and design applications.
Rather than fret over potential negatives, consider how you can take advantage of the coming sea change. This will impact how you spend your discretionary money (will we simply subscribe to ‘everything’ soon?), how you store you files, as well as how you share with friends and collaborate with colleagues.
This, is Big!
Dollar Army – Svilen Milev