Tags: business opinion
As a Photoshop licensor (not owner!) I’ve gotten various emails over the course of the year from Adobe advertising their Creative Cloud and incentives to sign up. My first reaction was “You’ve got to be kidding.” Wait, I can pay you more than I used to pay you for the software I use, and if I ever stop paying I can’t use my software anymore? I’d ask where I can sign up, but they’ve sent enough emails informing me that I know the exact answer. That’s a reaction that the internet in general seems to have had, but there seem to be some people who have embraced it.
There are three fundamental issues that people in general and I have with it: – It costs more. Let’s ignore the introductory year pricing for a moment. There are two ways it costs more. First, in the past you were always able to upgrade at your leisure and skip 2 or 3 versions between upgrades and still be able to purchase for the upgrade price. – You could purchase the original product and upgrades in sales. They may not happen often but you could occasionally get a good deal, and coupled with an every-other-year upgrade cycle you end up spending on the order of $75/year on Photoshop. – You could opt to not upgrade and continue to use the product until you finally upgraded to a computer with an operating system that simply would not support it. Figure that’s a good 10 years after the initial release of the version. That works out to $7.50/year if you want to think of it that way. – The end of discounts. Adobe no longer has any incentives to offer you any discounts ever again. They used to do it to get bargain shoppers to pay something for the current upgrade rather than skipping it and waiting for the next. Now it’s pay or your software deactivates. Once you’re hooked Adobe can set any price they want because you’re just renting the software now rather than purchasing a license, and if you stop paying you get evicted.
So now we’re faced with Photoshop costing $120/year and 10 years from now you’ll have dropped $1200 on Photoshop. And you KNOW you’ve been paying that whole time because if you don’t, you don’t get to use Photoshop!
So far I’ve only mentioned the incremental upgrade cost of Photoshop, which reveals the point where the Creative Cloud may reveal itself to have some value. If you don’t currently own Photoshop it’ll cost you $650 to purchase CS6. That’s distinctly not cheap and its high barrier-to-entry-price extends across the Adobe professional product line (Illustrator, After Effects, Premier Pro). With Creative Cloud you can spend just $240/year for each of these products individually, which means you’ll break even vs the previous entry cost in year 3, and you’ll already get the upgrade that you would have wanted to buy by then so really you’re break-even into year 4 of Creative Cloud single program. Then the economies of Creative Cloud turn in Adobe’s favor and you’re well hooked on their product and taking you for all you’re worth.
Hey, did you think $650 was a lot to spend on a single product? Well try $2500 for the Master Collection Creative Suite 6. That’ll get you all the big programs I’ve mentioned plus a couple others and it’ll sting pretty badly when it comes time to pay off that credit card bill. How does the Creative Cloud compare? Well now things get interesting. If you own a license to even the lowly Photoshop CS3 you qualify for the $360/FIRST YEAR price and have access to pretty much everything Adobe makes. At that price this is a great deal for both parties. Users get access to a ton of top-tier software for a reasonable price and Adobe gets a guaranteed revenue stream in perpetuity. Unfortunately the price jacks up to $600/year after the first year. That’s still a lot of money, but it’s still ultimately worth it. However, it definitely swings the economics back stronly in Adobe’s favor.
What do I think? I think the right way to go is to give people something palatable to keep them subscribing every year without a second thought. $360/year from every user one of your 8.4 million creative suite users according to cnet plus more from what I’m certain is a small army of photoshop-only subscriptions is a pretty tidy revenue stream, I’d say. For reference, in 2012 Adobe had $4.4 billion in revenue. So if every one of the 8.4 million CS users signed up for CC at a $360/year price, they’d have $3 billion in revenue, plus extra from other people such as my self upgrading themselves they’d easily exceed their 2012 earnings. However on JUST the complete CC users at $50/month will earn them $5 billion/year, so suddenly you see how this ends up being a big win for Adobe.