Adobe Systems is about to begin a difficult -- but smart -- transition.
The San Jose, Calif.-based company will overhaul its core software business in May when it launches a subscription service called Creative Cloud, which bundles its new Creative Suite 6 products with a swath of other products and services. To make it a success, it'll have to convince customers that it's a better value than traditional software licensing.
Here's an indicator of how hard the change will be: A CNET survey in March showed a frosty reception, with, compared with 32 percent who viewed it positively.
And 62 percent reacted negatively to its price: Creative Cloud costs $50 monthly with a year's commitment or $75 monthly with an month-to-month option that's easier to switch on and off. A Team edition for businesses will arrive later this year at a cost of $70 per month per user for an annual commitment. And to lure existing CS3, CS4, and CS5.x customers who might be tempted to pay for perpetual-license upgrades, Adobe has an introductory offer of $30 per month.
The centerpiece of the service is access to the full Photoshop CS6 for image editing, Premiere Pro and After Effects CS6 for video editing, and a host of other packages aimed at designers and creative professionals. The Creative Cloud also includes Adobe's Touch line of tablet apps, the new Edge and Muse programs for the HTML5 era of Web design, Lightroom, and a some online services such as file sharing and Web site hosting.product line, which includes
Creative Suite is optional. Adobe also will sell the traditional perpetual licenses to the software, either individually or in various bundles. With either the traditional sales or or the subscription, the software runs on a customer's computer. (For details on the new software, check.)
Adobe isn't expecting everybody to go for the subscription immediately.
"This is Adobe trying to be a little bit ahead of where the market is," said Scott Morris, senior marketing director for Adobe Creative Professionals. "Some will love it and jump immediately, and others will jump over time."
Indeed, Adobe will have to prove Creative Cloud's merits. But here are reasons why, overall, Adobe is making the right move to add it as an option.
1. Fluidly updated software
In days of yore, customers got their software on floppy disks, CDs, or DVDs. Programmers pulled together as long a list of changes as they could manage before a cutoff date.
But in the Internet era, customers increasingly download the software to begin with, followed by stream of updates, bug fixes, and security patches. Software is becoming a continuously updated project.
That means the programmers who make the software are less confined by the constraints of building a giant, monolithic release. When a feature is done, it can be added in an update distributed online immediately instead gather dust for a year or two awaiting the next major release.
In Adobe's case, it means that Creative Cloud customers will get new features before the perpetual-license crowd. "We are planning on delivering new features that would normally go into CS7 into Creative Cloud first," Morris said. "We plan new features later this year."
This more fluid update style is increasingly common. Chrome and Firefox developers release updates every six weeks. Sun Microsystems adopted a quarterly "release train" for its Solaris operating system years ago. Apple releases relatively frequent updates first with Mac OS X, then with iOS. Windows Update every month stamps out another batch of security vulnerabilities in Microsoft Windows and Office.
But the best example, perhaps, is Web sites and Web apps that can change every time a person loads it with a browser.
Continuous updates can make it harder for companies that must ensure various software packages get along together. But it's a powerful force sweeping the industry.
2. Online services
If a Creative Cloud subscriber is running Photoshop or Dreamweaver, the program and its files still are stored on the local computer, so it's not as if the Creative Cloud is some sort of Adobe equivalent of Google Apps.
But the Creative Cloud comes with a range of online services. And this, too, is an important trend in the computing industry Adobe is wise to tap into.
The spotlight is a Dropbox-like ability to sync files across Mac, Windows, iOS, and Android devices; subscriptions come with 20GB of storage space for the service. And a later company-focused version of the Creative Cloud, a more expensive plan at $70 per month for a year's subscription, will offer more, though details won't emerge until later this year.
Another important service is Adobe's Business Catalyst hosting service, which lets subscribers run up to 5 Web sites. It's of course integrated with Adobe's design software such as its new Muse tool that debuts in the CS6 suite, and they also can use the downloadable fonts in Adobe's TypeKit service for a more polished look.
And there are also social tools to show off designs, comment on others' work, share tips, and the like. It's not clear the world needs another social network, but Adobe would be foolish not to try to become more of a hub of activity for its many customers.
So far the online tools pale in comparison to the CS6 software. But as the Internet becomes steadily more capable at running apps, and Adobe's customers become steadily more interested in publishing on it, online services grow more important.
3. Lower barrier to entry
Adobe has a strong reputation for impressive design products, but at a cost of hundreds of dollars for individual titles and hundreds or thousands for suites, many prospective customers are doubtless deterred.
But $75 to use all the Creative Suite products for a month? That's a much easier commitment to make. Even $600 over the course of a year is compelling compared to $2,600 for the whole Master Collection.
Of course, there are caveats: customers will have to keep on paying to keep on using it, and not all of them need the full suite, and existing Master Collection customers can pay only $549 to upgrade to CS6. But providing a lower-cost entry point is a good idea.
And there are cheaper subscriptions, too, for individual titles such as Photoshop, Illustrator, and Premiere Pro. They can be had via subscription for $20 a month for the most part; the new Muse and Edge tools will cost $15 a month each.
Adobe also has a discounted plan for students that costs $30 a month. It requires a full-year commitment, but Adobe is considering a single-semester option.
There's no option for an even lower price over a longer period, say three years, but Adobe has kicked around the idea, Morris said. "We're definitely open to that," but it's not part of the short term plan, he said.
And there's one more option to mention, a three-month subscription that third-party companies such as Amazon will be able to sell. "It's like buying gift card for Pottery Barn," Morris said.
4. Bundling bonanza
The Creative Cloud comes in one size only: everything.
That means customers who might otherwise have opted for a subset of Adobe products will get access to more -- and perhaps acquire a taste for them. Take for example the $1,300 Design Standard collection, which includes Photoshop, Illustrator, InDesign, and Acrobat Pro. Subscribing to the Creative Cloud, a customer might also discover that Dreamweaver, Edge, and Premiere Pro useful.
Oh, and how about Lightroom? And you can publish magazines to iPads with the Digital Publishing Suite? The full smorgasboard is available.
It's a great way to hook customers on packages they might not have sprung for individually. And if they prove their worth, the customers will keep on paying for them.
Adobe has some reason to be optimistic. Years ago, it introduced bundles when it moved to its Creative Suite strategy. Customers were frosty on the idea initially, but no more.
"When we first had the idea of creative suites, initially a lot of customers said it's a terrible idea," Morris said. "Now 75 percent of our units sold are suites."
5. Adobe's business benefits
One of the big benefits of subscriptions is that businesses move from bursts of revenue to recurring revenue. That smooths out quarter-to-quarter financial results and ideally, from the perspective of the company doing the selling, means customers keep on paying year after year.
"You have more predictable revenue when you amortize your earnings over a 12-month period compared to a heavy reliance on upgrade cycles," Morris said.
Adobe's quarterly earnings have always been something of a roller coaster as new versions of its products drive sales, but then purchasing drops off during the lulls. Why buy a product if you guess its replacement is coming in a few months and you don't really need it?
With subscriptions, a customer can get in on the action whenever it's convenient, and the upgrade will arrive at no extra cost.
So there are real benefits to customers for Creative Cloud. There are drawbacks, too, but that's why it's optional.
Updated at 8:36 a.m. PT to correct the description of the Design Standard suite and insert Adobe's corrected table of CS6 varieties.