Adobe's Creative Cloud: A route to bring laggards up to speed

Adobe's Creative Cloud: A route to bring laggards up to speed

Summary: Adobe sits in the intersection of the two software business models and the Creative Cloud will swing it closer to a subscription revenue stream.

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Adobe's Creative Cloud launched along with its Creative Suite 6 product lineup and the move marks a transition to the cloud and a big experiment on whether a traditional shrink-wrap powerhouse can move to a subscription model.

The financial success of Creative Cloud will depend on two primary factors---bringing laggards (those people using Creative Suite 3 and 4 up to date and Adobe's ability to expand its customer base. Another potential side benefit from the Creative Cloud would be reducing piracy, which costs Adobe a bundle.

More: CNET: Adobe makes the CS6 sales pitchFive reasons Adobe's CS6 subscription is smart

Source: Adobe via CNET

As noted previously, Adobe's transition to the Creative Cloud may cause some pain before any gain. Moving from licensing to subscription can be painful at first. In the long run, the transition can work. Today, Adobe sits in the intersection of the two software business models.

Related: Adobe's biggest Creative Cloud perk could be lower piracyAdobe’s shift to cloud is going to hurt at first

For instance, Adobe launched 14 Creative Suite 6 point products and various suites. The pricing breaks down like this.

  • Adobe Creative Suite 6 Design & Web Premium goes for$1,899;
  • Adobe Creative Suite 6 Design Standard will cost you $1,299;
  • Adobe Creative Suite 6 Production Premium will cost $1,899;
  • and Adobe Creative Suite 6 Master Collection is $2,599.

There's upgrade pricing for those on older editions.

The Creative cloud will cost $49.99 a month based on an annual membership and $74.99 for a month-to-month deal. Adobe will offer a $29.99 limited time deal for CS3, CS4, CS5 and CS5.5 users.

If Adobe can convert those CS3 and CS4 users it will generate returns on its cloud offering. Why? CS3 and CS4 folks probably wouldn't move to CS6 anyway. In addition, Adobe will keep those customers in the fold.

The Creative Cloud isn't all gravy. Adobe would obviously get more of a revenue pop if it just sold these customers a pricey CS6 version. A $49.99 subscription to Creative Cloud would take 51 months to garner the revenue from the Adobe Creative Suite 6 Master Collection. On the other side, of the equation Adobe keeps the customer and can upsell new services. "Creative Cloud pricing was as expected and should increase the value per customer over time," said Morgan Stanley analyst Adam Holt.

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13 comments
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  • Or how about...

    ...Adobe charge a *REASONABLE* price per product (let's say $49.99 each, no bundles), and immediately find that their revenues shoot through the roof as everybody buys them, rather than use the alternatives...

    Adobe seems to be stuck in a world where $$100s per package was "reasonable", vs the cost of a PC.

    With a *very* decent PC/Laptop now costing in the $400-600 range, the percentages just don't add up anymore.

    -PJC
    pjc007
  • Dirt cheap!

    Bah! Adobe still ripping us off! We pay $4,725.54 for the Master Suite over here! It is cheaper to fly to the States, stay in a luxury hotel, eat at a classy restraunt, buy a copy of CS6 and fly home again, than it is to buy it on Amazon!
    wright_is
  • I used to go to the tool rental place

    for a cement mixer, or even something cheap, like a skill saw when I didn't have to use them every day. Can't imagine renting a hammer instead of buying one.
    sparkle farkle
    • Most companies...

      lease or rent cars, instead of buying them... There are good reasons for doing that.
      wright_is
      • "lease"

        see Subject
        AtlantaTerry
  • Flexible

    The flexibility is good. If you are working on a project and need 6 extra heads for 6 months, that is a saving of several thousand dollars on licensing costs, when you just need to pay for cloud licences for 6 months, instead of buying 6 new, full copies of the suite.

    The same goes for quickly exanding companies. You spread the costs over time. If Adobe don't update the package for a while (4.5 years US, 5.5 years UK or 4.8 years mainland Europe*), then it will be cheaper to buy the Master Suite than rent it, but if they upgrade during that time, it more than pay for itself.

    Obviously using an American credit card will save me around $381,12 a year over my German card...

    * Taking US prices of $49.00 and $2,599, UK prices of $61 and $4,187 and German prices $80.76 and $4,725
    wright_is
  • Why do Laggards have to come up to speed?

    You define laggards as those people using Creative Suite 3 and 4 instead of buying the newest. Well, just maybe CS3 or CS4 meets their needs. Why should someone have to buy the latest version of software if the prior one works? (Windows XP, for example.)

    Ill tell you why: because Adobe wants it. Not only will going to a cloud service insure that people will have to buy the latest version, it insures that they will be paying for it every month -- forever. No one purchase price and use as long as you can. Kind of like buying a music CD but instead of a purchase price one time, you pay for it regularly forever.

    This is the main reason why software companies want the cloud: money. On top of all the disadvantages of the cloud (outages, hacking, government grabbing data, etc.), you will have to pay more for the right to use software. Plus once youre locked into using their cloud and software, it will be a major problem to try to change, so youre going to have to pay whatever price they want. Today its $50 per month. What will it be tomorrow?

    You even admit that: "Moving from licensing to subscription can be painful" but you ignore this by adding that: "In the long run, the transition can work." Sure, it will work better -- for Adobe, not for us. Doing your work in the cloud means that sometimes you wont be able to work at all. Is your internet provider up 100% of the time? Does it slow down during peak hours? Will Adobes server always be up and available for you to use? The same as their licensed software on YOUR computer will be?

    You continue with: "If Adobe can convert those CS3 and CS4 users it will generate returns on its cloud offering. Why? CS3 and CS4 folks probably wouldnt move to CS6 anyway. In addition, Adobe will keep those customers in the fold." Interesting. You're saying that these people, who paid big money for the software in the first place, should now sign up for a version they don't need, and pay an additional $50 per month! Amazing!
    Shara8
    • Money...

      [i]Why should someone have to buy the latest version of software if the prior one works?[/i]

      Because Adobe don't make any money out of you, if you don't upgrade. Money you spent on adobe products 4 or 5 years ago has been spent on salaries and research into new products, therefore they need to generate new income to keep the company moving forward.

      It isn't about "you" per se, but about how Adobe can try and tempt you to keep spending you money with them, so they can stay in business. That is how businesses work: constant income stream and at best, that stream should increase every month.

      As you say, it ensures their revenue stream going forward, if you switch to a the rental model - hey, they are magnanimous and let you download newer versions "for free" when they are released! :-D

      [i]Kind of like buying a music CD but instead of a purchase price one time, you pay for it regularly forever.[/i]
      No, more like instead of buying a music CD, you pay for the bands "channel" and can listen as much as you want and get all their new material, when it comes out.

      [i]his is the main reason why software companies want the cloud: money. On top of all the disadvantages of the cloud (outages, hacking, government grabbing data, etc.), you will have to pay more for the right to use software.[/i]
      You aren't forced to use the "free" storage.

      If you don't use the software often enough, you will pay "more". But you need to pay for the "rental" for over 5 years, without needing anything the upgrades bring, before renting is more expensive.

      For existing, happy users, there is no reason to upgrade or rent. For new users, it is a very good deal and for many companies, it makes a very cost effective way to legally licence their users.

      Microsoft offer the same sort of deals with Office 365.

      [i]You even admit that: "Moving from licensing to subscription can be painful" but you ignore this by adding that: "In the long run, the transition can work." Sure, it will work better -- for Adobe, not for us.[/i]
      Again, it depends. There are a lot of people who would like to use parts of the suite, but can't afford the $4,700 for the Master Suite, but they can afford $80 a month (German prices) for Cloud Collection.

      [i]Why? CS3 and CS4 folks probably wouldnt move to CS6 anyway.[/i]
      Possibly, some upgrade every 2 or 3 versions, because they can't afford every upgrade. Others put it off, until a client offers them a project, where provided material in newer formats or with elements that aren't supported in the older version. Then they are forced to pay for a large upgrade.

      For those sorts of customers, the model is good. Likewise, if they have a "slack" period, they can stop paying, until they get new work, then start paying again.

      At the end of the day, the big winner will always be Adobe, but for many freelance professionals and project based shops, it offers a way to spread the costs to match their income.
      wright_is
    • You actually don't work "in the cloud"

      I just subscribed and read the entire FAQ before signing up. You download the apps just as before. You do not have to be online to work--you don't work "in the cloud" as with Google apps. The software does need to "call home" once a month. You are under no obligation to continue if you have the month to month plan. I don't work for Adobe, I'm just a customer who thinks the creative cloud plan is pretty good--not perfect, but better than nothing.

      Incidentally, if you have a 64 bit system, and you are running cs or cs3 on it, as I do occasionally, they run a lot more slowly and are more crash prone. My 64 bit CS5 versions are much more stable. (I have had one customer who insisted that a project use Photoshop CS, saved as Photoshop CS - so I keep them installed for when I may need them).

      I found the creative cloud good for me, because I have never had an Adobe suite, even though I regularly use Photoshop and Dreamweaver CS5, and Adobe offers absolutely no or very expensive upgrade deals for those with single apps. (I think they should do better by their single app customers, but they don't.)
      Robert Meppelink
  • I can't afford another $30 per month ... forever.

    Screw Adobe and the "cloud". I'll just stick with CS5.5, thank you.
    AtlantaTerry
    • $30 a month...

      I can't afford the $4,700 for Master Suite - I couldn't afford the $4,900 for the CS5.5 Master Suite either. The monthly costs mean I can afford to use it as and when I need it.

      I can either save up the money over 5 years and buy the newest version then, or I can spend the money I would have saved every month on the rental and use the software now...

      No, the Cloud version isn't for everybody, but it does have some advantages for some users.
      wright_is
  • I don't think you are looking at the right metrics

    You said it would take fifty-one months to receive the same revenue from the highest shrink wrapped creative suite, (which possibly sells the least.) I think Adobe is looking forward to higher gross sales by converting older versions C3, C4, C5, and especially pirated copies to step up. They could conceivably show a higher return on this model, than on any others on a year to year comparison. I think there's an awful lot of pirate copies of older software out there, not because people are basically dishonest, but because a lot of people are not particularly rich. Adobe is in a position to do for software-as-a-service, what Apple did for mobile computing. What the software industry will be looking at is how many other software manufacturers follow suite. Can Adobe be it's own tipping point?
    mikejquinn1@...
    • Agreed

      [i]I think Adobe is looking forward to higher gross sales by converting older versions C3, C4, C5, and especially pirated copies to step up. They could conceivably show a higher return on this model, than on any others on a year to year comparison. I think there's an awful lot of pirate copies of older software out there, not because people are basically dishonest, but because a lot of people are not particularly rich.[/i]
      That is certainly a big audience, those that couldn't afford to stump up thousands of dollars in one go for a CS edition. They have either used other alternatives or used pirate copies.

      Some have bought a version, when they set up their business and have never upgraded, because they can't afford it.

      This offers them a chance to keep pace and go for new projects, using the latest features, without having to fork out large amounts of money.
      wright_is