Adobe Systems Inc. has officially moved its market leading graphic design and productivity offerings to the cloud with the May launch of Creative Cloud. The move constitutes a major change in business model, but the Street isn’t entirely convinced it’s the right one.
If it’s not the right one, it’s certainly an exciting and welcome one for consumers who have for years had to put up with very expensive products nevertheless out of the reach of many would-be users. (Many people know a person or two running a version of Photoshop three years out of date—if the copy wasn’t pirated to begin with.)
What Creative Cloud does is allow consumers to pay a monthly fee to subscribe to various Creative Suite applications like Photoshop, Illustrator, Dreamweaver, which includes other benefits like syncing, sharing and cloud storage, this instantly makes such apps affordable for more than just professional designers employed by enterprise or big media and advertising firms.
But as with any initiative there has to be something in it for the business. The answer may lie in the long-run growth prospects for Adobe’s two main lines of business—products and subscriptions. Adobe’s official reason is of course more politic. It says it moved to a cloud-based subscription model because users were “screaming” for the ability to publish direct to tablets like the iPad and to publish web sites.
As Scott Morris, senior director of product marketing, puts it, “They’re really frustrated that that they can’t get that beautiful magazine they can design to the iPad, which is perfect for an interactive magazine experience.” Ironically, the ability to publish to a tablet using Creative Cloud isn’t yet available, but Morris says it will be this fall. (Tablet publishing is handled separately via Adobe’s Digital Publishing Suite.)
In the meantime, Adobe will just have to content itself with the steady, rather than periodic, stream of revenue afforded by its new model. “From a business perspective for us what this means is customers are constantly engaged with Adobe. It’s a very attractive price point. But over the course of time it’s actually more attractive for Adobe because of higher lifetime value from our customers—they’re paying us a little bit each month … and we ultimately do better financially over the long run.”
Adobe isn’t abandoning its retail and corporate reseller channels either; subscriptions to Creative Cloud will be sold via point-of-sale activation cards. From conception to launch, Adobe made its move to the cloud very quickly. A team of engineers was immediately assembled and eight months later Creative Cloud was ready to launch. Adobe is doing this without any additional marketing push and instead relying on a word-of-mouth “halo effect.” But that might only get you so far. As the saying goes, you have to spend money to make money.