In May, software producer
Adobe Systems Incorporated
) made a landmark announcement when it said it was moving to a
subscription-only model for its leading products like Photoshop. In
the Creative Suite became Creative Cloud
To be clear, the Creative Cloud isn't really cloud-based the way
) Docs is. Basically, the Creative Cloud is traditional desktop
software with some cloud-based enhancements like remote storage and
social sharing capabilities.
Adobe's announcement caused significant outrage among users,
especially since for many people, the transition to the Creative
Cloud represents a significant price increase while permanent
ownership is being revoked.
As an example, I could theoretically use my copy of Photoshop CS5
(for which I paid $220) until the end of time, so long as I had a
computer that could run it.
But should I want to upgrade to the latest Photoshop, I'd have to
pay $19.99 per month or $240 per year, while knowing that I'd lose
my ability to use the software at all should I be unable or
unwilling to pay this amount at some point down the road.
While I wasn't terribly outraged since I have no intention of
upgrading anytime soon (I'll cross that ugly bridge when I come to
it), plenty of folks were making their voices heard.
An online petition at Change.org garnered nearly 33,000 supporters:
There was also plenty of anger seen throughout the blogosphere,
perhaps expressed best by photographer Brad Trent in his post
Why We All MUST Fight Adobe and Stop the Creative
The real controversy is that from now on, you won't have the
ability to move forward incrementally as you see fit. In the past,
if Adobe trotted out an upgrade to Photoshop that didn't fit your
workflow, you could just keep using the version you had and wait
for the next version before you kicked in your money to be up to
date. Adobe obviously didn't like this. They saw it as a
money-losing proposition if users didn't slavishly continue along
the upgrade ladder, paying for the privilege, of course.
put together a spectacular summary of the ramifications and
described Adobe's actions as a
colossal marketing and PR blunder that only a truly insular
organization could have invented."
Now the good thing about a controversy like this one is that, as a
public company, Adobe's obligated to let us know what's going on in
terms of actual sales.
Did the negative PR hit Adobe's bottom line?
The answer is a big, fat resounding... probably not.
Adobe reported better-than-expected earnings at $0.36 per share
while revenues were in-line. On the downside, third-quarter
earnings and revenue guidance were below consensus estimates.
However, the big news is that Adobe saw an acceleration in
signups for the Creative Cloud, with 221K subscribers added vs.
expectations of around 185K subscribers. And this was a big
improvement from the 153K subscribers added last quarter. Plus,
Adobe is expecting an even greater number of subscribers to come on
board during the third quarter.
This is where things get interesting.
On one hand, Adobe is being told by both customers and Wall Street
that it's moving in the right direction.
Yet the company also said this on the earnings call:
Our decision to discontinue perpetual licensing of new versions
of our desktop products has caused concern with some customers.
While we will continue to offer CS6 on a perpetual basis, the
feedback from our community is important and we are evaluating
additional options that will help them with the transition. Our
goal is to over-deliver on customer expectations, which we believe
will make the entire community ultimately embrace Creative
So to some extent, Adobe is hedging its bets on Creative Cloud with
this ambiguous statement, which could be interpreted a million
different ways -- the phrase "additional options" doesn't offer
much in the way of clarity.
Presumably, its most logical concern is that signups slow down,
leaving it facing the challenge of converting those of us who see
no need to upgrade our existing Adobe software products. But at the
same time, the company probably doesn't want to aggressively
trigger such worries because the appearance of momentum is
important to both customers and investors.
Stay tuned -- I suspect this story's going to get a lot more
interesting in the quarters to come.
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