Adobe says good bye to software purchase, goes subscription only

[Syt]

http://news.cnet.com/8301-1001_3-57582735-92/adobe-kills-creative-suite-goes-subscription-only/

Adobe kills Creative Suite, goes subscription-only

Just a year after launching its $50-per-month plan, Adobe has made its Creative Cloud the only way to get the new versions of its full software suite. Customers "overwhelmingly" prefer it.

In a major shift for its business and its customers, Adobe Systems on Monday announced it no longer will sell its Creative Suite software as it moves instead to the $50-per-month Creative Cloud and other subscription plans.

"We have no current plans to release another perpetual release of the CS tools and suites. Creative Cloud is going to be our sole focus moving forward," said Scott Morris, senior director of product marketing for Creative Cloud.

When Adobe launched its Creative Cloud subscription last year, executives weren't sure how long it would offer it alongside the traditional perpetual-license sales for its software. But customer enthusiasm for the Creative Cloud, combined with the awkwardness of maintaining it alongside the slower-moving CS products, led the company to move aggressively to the subscription plan.

"We expected it to be a couple years before this happened. But we were surprised by how successful Creative Cloud has been," Morris said. "We know that's going to be a difficult transition for some customers, but we think it's going to be the best move in the long haul."

It's not just a big difference for customers. With the change, Adobe moves its business more to a recurring-revenue approach. Instead of revenue surging when upgrades such as CS6 arrive, the company gets a steady stream of money.

"There's a stacking effect. When we bring customers in, they stay in. Then when we bring in new customers, we layer the revenue on top," Morris said. "Recurring revenue is going to help Adobe in the long run. That's one reason Wall Street responded very positively."

The company announced the change at its Adobe Max conference along with major updates to its software -- the programs that would have borne the CS7 logo but that now will be rebranded just as CC. Adobe's new CC software includes a version of Photoshop that can correct some camera shake in photos, of Illustrator that can let designers edit elements with multitouch devices, of InDesign that now supports high-resolution monitors like Apple's Retina displays, and the new Refine Edge tool for selecting particular regions of video in After Effects.

For full details, check CNET's complete Adobe CC product news from my colleague Lori Grunin.

What is Creative Cloud?

The Creative Cloud grants access to all the software in the full Creative Suite; newer products such as Muse and Edge Animation for Web developers and Lightroom for photo editing and cataloging; and services for activities including file sharing, collaborating, and Web publishing.

The subscription costs $50 a month for those who sign up for a year's commitment, though Adobe has discounted the monthly price to $30 for those with earlier versions of CS and has just added a $20 price for those with the newest CS6 version that Adobe released last year.

"Customers who invested last year in a perpetual license, might feel their upgrade path was taken away from them, so we'll be giving them a screaming deal," Morris said.

There also are other subscription plans. For $75 per month, customers can use CC products on a month-to-month plan rather than a full-year commitment. For $70 a month, Adobe offers the Team version for businesses with multiple employees using the software.

For those who don't want the entire suite, Adobe offers subscriptions to individual programs. And now they're cheaper, down from $20 a month to $10 a month in a one-year promotion for existing CS customers, Morris said.

The shift to subscription pricing has been gradually spreading across the computing industry as the Internet has simplified software distribution. Early pioneers such as Red Hat argued that customers are better off with a steady stream of payments that gets them a steady stream of updates.

Now subscription pricing is spreading to software such as Google Apps, Evernote, and Dropbox that are inextricably linked with online services. The shift is aided by pay-as-you-go infrastructure such as Amazon Web Services that lets companies use and pay for only as much computing power as they need.

Some people just do not like subscription pricing, and they'll have to make do with CS6, which Adobe will continue to sell, or with rival products. But those who've carped about the Creative Cloud are a minority, Morris said.

"Overwhelmingly, when you compare the people who've complained about the new model to the people who loved it, it definitely skewed heavily to the new model," he said. "Obviously we would not be making a decision this big if the percentage of people in that category was so big it was the wrong thing for us to do."

Continuous updates

One of the profound shifts for subscriptions is that software typically is continuously updated. With customers making steady payments, software makers can release steady improvements as they're ready rather than holding them back until ready to release a major paid update. After all, the software makers want their customers to renew their subscriptions.

The CC app overhaul that Adobe announced Monday will arrive in customers' hands in coming weeks, but after that, customers should stop expecting massive, across-the-board updates, Morris said. Features will arrive when they're done for the most part, though Adobe might synchronize some updates across related packages like After Effects and Premiere Pro or align some release schedules for events like Adobe Max.

CS customers typically only bought a subset of Adobe's products; the full Master Collection costs a whopping $2,500. With the CC model, though, they get access to all the software. That means customers can try new software.

"We do know the average number of apps people download and install in CC. It's high," Morris said. And Adobe measurements show they're using the new apps, too, he added. "People are doing more with CC than they are with CS."

Some might fear that once they're signed up for Creative Cloud subscriptions, they're subject to Adobe's pricing whims. Buying perpetual licenses for Adobe software has never been cheap, but customers knew they'd be able to use it without any unwelcome price-hike surprises.

Morris, though, assures customers they need not fear Creative Cloud price hikes.

"One reason people were resistant to CC is they were afraid in year two we'd raise the price to $100 a month," Morris said. "We have no intention of doing that. If we did that, we would completely lose everyone's trust and fail in what we're doing."

Of course, many of the customers signed up at the promotional $30-per-month pricing for their first year. Might they abandon CC once their annual rates increase from $360 to $600?

"We've made it really clear to folks that you get the discounted price only for the first year," Morris said. "We're pretty confident that even when the price normalizes at the $50 list price, most of these customers are going to stay."

[Syt]

And I had a quick peek - the subscription via Adobe Austria is €61.94 (= $81) per month if you sign up for a year. not the equivalent of $50. Add 50% if you want to be able to cancel on a monthly basis.

[Warspite]

Any guesses as to how much of that article was based on the press release? 70, 80%?

[garbon]

Oops, Syt scooped me. I went for the Computer forum.

[Darth Wagtaros]

Bastards.

[Zanza]

I work with enterprise level software and just about everything requires you to pay something like 15-20% of the the initial license fee in yearly maintenance (and a SAP license can cost 1000s of Euro). So for a software that aims at professionals like Adobe clearly does, it might make sense to go that way. Consumers probably don't generate a lot of revenue anyway.

[fhdz]

There's at least one reason Adobe software has traditionally been heavily pirated - their pricing has been outrageous.

[garbon]

There's at least one reason Adobe software has traditionally been heavily pirated - their pricing has been outrageous.

True that.

[Warspite]

There's at least one reason Adobe software has traditionally been heavily pirated - their pricing has been outrageous.

Why is it outrageous? Their software is rich with features for professionals who then use their products to in turn generate lots of revenue for themselves. Sounds to me like exactly the sort of software that should cost a lot of money.

[garbon]

There's at least one reason Adobe software has traditionally been heavily pirated - their pricing has been outrageous.

Why is it outrageous? Their software is rich with features for professionals who then use their products to in turn generate lots of revenue for themselves. Sounds to me like exactly the sort of software that should cost a lot of money.

Lots of people use the Microsoft Office suite to in turn generate lots of revenue for themselves.

[Syt]

There's at least one reason Adobe software has traditionally been heavily pirated - their pricing has been outrageous.

Why is it outrageous? Their software is rich with features for professionals who then use their products to in turn generate lots of revenue for themselves. Sounds to me like exactly the sort of software that should cost a lot of money.

Why then bother to offer two prices - one for companies and one for private people? At lowest, the subscription for PhotoShop only, if you sign for a year long contract, is EUR 25.-, or 300 per year (twice that if you go for the full suite). The price for companies is ca. 20% above that.

I think there's few private people who are prepared to plop down EUR 300.- per year to get what they need from a graphics program (and I'm of course aware of cheaper alternatives).

[fhdz]

There's at least one reason Adobe software has traditionally been heavily pirated - their pricing has been outrageous.

Why is it outrageous? Their software is rich with features for professionals who then use their products to in turn generate lots of revenue for themselves. Sounds to me like exactly the sort of software that should cost a lot of money.

It presents a serious bar to entry for entrepreneurs who have talent but limited resources.

If you work at a large company, you're not buying the software yourself anyway - your company is.

[The Brain]

There's at least one reason Adobe software has traditionally been heavily pirated - their pricing has been outrageous.

Why is it outrageous? Their software is rich with features for professionals who then use their products to in turn generate lots of revenue for themselves. Sounds to me like exactly the sort of software that should cost a lot of money.

It presents a serious bar to entry for entrepreneurs who have talent but limited resources.

If you work at a large company, you're not buying the software yourself anyway - your company is.

Elaborate.

[Zanza]

Lots of people use the Microsoft Office suite to in turn generate lots of revenue for themselves.

Microsoft Office 365 has a subscription model as well. Much cheaper, but then Microsoft has a much broader user base and other related sources of revenue (Skydrive, Windows, Windows Server, SQL Server, Exchange Server etc.)

[Zanza]

There's at least one reason Adobe software has traditionally been heavily pirated - their pricing has been outrageous.

Why is it outrageous? Their software is rich with features for professionals who then use their products to in turn generate lots of revenue for themselves. Sounds to me like exactly the sort of software that should cost a lot of money.

It presents a serious bar to entry for entrepreneurs who have talent but limited resources.

If you work at a large company, you're not buying the software yourself anyway - your company is.

I would expect that a $50/month subscription is easier to pay for a newly established entrepreneur than paying a huge $1000+ license in one go. That would allow him to immediately start work and re-earn the $50...