Adobe wants to reboot their relationship with you in two substantial ways. First, Adobe now wants you to “subscribe” to their Creative Suite. Second, they want you to pay and stay on the latest version of their software. Adobe also has a pricing dilemma, and it remains to be seen how they will resolve the issue of how much their software costs.
The Creative Cloud
Adobe no longer wants to simply provide a “perpetual software license” for a specific version of its products. Starting sometime in the spring or early summer of 2012, Adobe will launch the “Creative Cloud.” Beginning with the CS6 suites, they want to sell you a subscription to their software and software updates, along with some space (possibly 20GB) in the “Creative Cloud.” This is different from the perpetual software license in two ways: the perpetual license will not include the Creative Cloud space, and the subscriptions will be for a specific term, either by the month or by the year.
After reading through many blogs that cover Adobe, and a conversation with an Adobe executive, my best conjecture is that the subscriptions to the various Creative Suites (Design Standard, Design Premium, Web Premium, Production Premium, and eLearning) will cost about $600 annually. Subscriptions to the individual software components of the Suites will be priced lower (how much lower is a good question), and the annual subscription to the Master Collection will be higher.
Doing the numbers
If you look at the Adobe site, you’ll see that you can only purchase perpetual licenses for the components contained in the various current Creative Suites. You can also, as of today, “subscribe.” Currently, you cannot subscribe to any of the Creative Suites. With Adobe pricing as it stands right now, things don’t add up the way you might expect them to.
The current Creative Suite (CS5.5) Production Premium includes After Effects, Premiere Pro, Photoshop Extended, Illustrator, Flash Professional, Flash Catalyst, Audition, and several other useful bits and pieces.
Let’s look at the proposed annual subscription model for Production Premium CS6, and for Adobe Photoshop as a standalone package. At about $50/month for the upcoming Suite and $35/month for Photoshop (regular, not the extended version), the math makes it far more expensive to subscribe than to purchase an upgrade for either. If you purchase the .5 (dot five) versions that Adobe promises to deliver every other year as well, a subscription is even more expensive.
Historically, Adobe has had a major release about every 18 – 24 months. Now they have promised a major update every other year and a minor update in the in-between years. Here’s the math for Production Premium CS6, assuming it’s available in the April – June time frame and assuming prices stay as they currently are: If I were going to purchase a license for the new full version, the current price (not the upgrade price) on the Adobe Store today is $1444.15 (the regular price is $1699). If I buy my CS6 license in April or May and don’t buy the .5 version upgrade (CS6.5) promised in 2013, I’m good for two years. At that cost, it makes sense to subscribe.
But it won’t work that way. Most of us will upgrade from some version or another. Purchasing an upgrade license from CS3 currently costs $806.65; from CS4 the cost is $551.65. CS4 is a wash for the subscription/purchase prices. Here’s how the costs worked for me: I purchased a CS4 Production Premium upgrade license in April of 2008 for ~$509. I bought the CS5 Production Premium license at the same price in April 2010 when it was released. Between CS4 and CS5, there was no mid-cycle (dot 5) upgrade, so I used the software for two years for $509 or ~$21/month. Then I purchased CS5 at the end of the second year, which changed the total to $1018 over three years or ~$27/month – still far less expensive than the proposed subscription. In my scenario, I had purchased two major releases that I used for three years. $27 a month is a long way from $50 a month.
I hope you’re still with me. Last April I purchased CS5.5 for $359.50, including tax. Between April of 2008 (from CS4 purchase) and April (maybe) 2012, my cost was an aggregate of $1377.50. That works out to $28.69 per month. I’d pay that. I’d even pay $35. But the new subscription rate of $50/month represents a whopping 57% increase in my monthly costs for just the Creative Suite. I’m not so sure I can or want to pay that kind of an increase. I need several other programs as well. If Adobe includes Dreamweaver, Fireworks and Acrobat Pro in the projected $50/month, it might have value for me. If not…
The math for individual software packages is even stranger. For example: If you want or need to purchase only Photoshop (regular version, not the extended version) and are buying the full version, it costs (currently) $594.15, discounted on the Adobe site from $699. If you’re upgrading from version CS2, 3, or 4 to version 5.5, the upgrade price is $169.15 (regular $199) But a one-year subscription is $420/year ($35/month). And if this isn’t already clear as mud, Adobe really wants to sell you one of their Creative Suites. If I want to buy the eLearning Suite, I can “upgrade” for $399 from Production Premium. I already have Photoshop Extended, Flash Professional, and Audition in the Production Premium Suite. All I’m really getting if I bought the eLearning Suite is Captivate, Acrobat, and Presenter. The eLearning Suite costs $468/year ($39/month) for an annual subscription.
Adobe admits (on at least one of their blogs) they have not done a very good job of selling this concept to its huge and diverse user base. The Adobe user base includes everyone from hobbyists to large studios and corporations. Hobbyists generally can’t afford $600 per year to keep their software up to date. I have no way of knowing what percent of the Adobe user base is hobbyists and what percentage are businesses that can afford a bump in the annual cost of owning Adobe software, but I’m guessing from all I’ve read that most Adobe software or Creative Suites users are individuals.
New Upgrade Policy
The second issue is upgrades. Last fall, at the Adobe MAX conference, Adobe announced there would be no upgrade allowance to version 6 of the Creative Suites for users of any version before CS5. If you had an earlier version of the software, you could only move to the subscription model.
The hue and cry was enormous. Forums were filled with negative comments. Many users in the Adobe community can only afford to upgrade every second or third version. The reasons are many, but the cost of Adobe software is too high for many people, so they wait a few versions between purchases, then purchase at a higher upgrade price. That price is higher than the upgrade price from one version to the next, but still palatable. Scott Kelby, the president of NAPP (National Association of Photoshop Professionals) wrote an open letter to Adobe criticizing them for their secretiveness around changing upgrade policies and made a plea that they start their new upgrade policy with the software release in two years instead of the release this year. On January 12th of this year, Adobe amended their policies for upgrades from versions 3 and 4, and will maintain their current policy for at least another year.
There’s more to come
There is one more issue: Competitive pricing. Adobe is facing some strong headwinds in the pricing area. Their competition isn’t standing still, and has kept prices low while improving their software. In the video space, Apple has substantially lowered the price on Final Cut Pro X (FCPX). Final Cut used to have a retail price of $999. When Final Cut Pro was released last April, Apple lowered the price to $299. In the video space there is a lot of competition with robust programs and lower prices. If Adobe is sensible about pricing, then they will regain the market share they gained while Apple wasn’t upgrading the Final Cut Pro. True, there are some issues with FCPX in the editing community, but currently there is a $380 price difference in favor of the Apple product. Sony Vegas Pro, a robust program, costs $599.95 for a full version and $199.00 for an upgrade, and is even less expensive if you upgrade between the announcement and release of a new version.
A lot remains to be seen about the Adobe subscription model. Will Adobe be able maintain its installed base, or will they overprice the true value of their products? The software business is competitive, and Adobe needs to make difficult choices to remain both competitive and profitable. We’ll know more in the next few months.