Adobe Ditches the Box, Puts Apps in the Cloud

Discussion
May 07, 2013

Forget about thinking outside the box. Adobe is doing away with it altogether. The company announced it would no longer sell packaged software. It also is not going to make its creative apps, such as Photoshop, available for download to individual’s desktops. No, if you want Adobe software, you’ll have to go to the cloud to get it.

The move is seen as a risk for Adobe, which currently generates $4.1 billion in revenues from the sale and licensing of its packaged software to creative professionals. All new software created by the company will be available through a subscription service called Adobe Creative Cloud. With the cloud service, subscribers gain access to the company’s extensive line of creative applications, online services that help production flow, and online storage capabilities.

"The reason we’re doing this now," Scott Morris, senior director of marketing for Creative Cloud, told Time, "is because [Creative Cloud] adoption has been so amazing."

According to Adobe, half a million subscribers joined Creative Cloud in the year since it was first launched.

"Customers have to come to terms with the end of perpetually licensed software," IDC analyst Al Hilwa, told The Associated Press. "Adobe is ahead of the game."

Brad Zelnick, an analyst at Macquarie, believes Adobe could see subscription revenues reach $697 million by the end of the year.

"The important point is the cost of renewing that subscriber is less than the cost of acquiring the customer in the first place," Mr. Zelnick told The Wall Street Journal. "You see efficiency from the direct relationship with the customer compared to the discrete software sale in the old business model."

Subscription pricing for individuals starts at $49.99 a month for new customers. Existing Creative Suite customers, students and teachers will pay $29.99 a month.

Will Adobe’s move to a cloud subscription service be a success? How soon do you think it will be before Microsoft and other traditional software firms follow Adobe’s lead and stop selling packaged software or apps that can be downloaded to desktops? What will this mean for retailers who sell packaged software?

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10 Comments on "Adobe Ditches the Box, Puts Apps in the Cloud"

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Ken Lonyai
BrainTrust

Well, there aren’t many retailers that sell packaged software, mostly e-tailers. For them, the whole SaaS movement isn’t a good thing unless they’re affiliates getting a cut for funneling customers to the service.

For Adobe and others, SaaS is a more profitable model that also allows a more aggressive release cycle and more importantly, a quiet way to update flaws and bugs that they let slip into use. It’s hard to say whether it will work for them, but most likely it will catch on, since people have had the word ‘cloud’ pounded into their head for some time now.

As a very long time contributor to Adobe’s profits, we don’t like essential software in the cloud. In an age of ultra cheap storage and very fast SSDs, as magical as it sounds, there’s almost no real user benefit from cloud software and a number of negatives.

Steve Montgomery
BrainTrust

It may or may not be a success, depending on how many people have the same bias I have. While I might not like the price of some software once I buy it, I own it and can continue to use it until such time as a new version offers “must have” features. Depending on the software, this can a couple years to a relatively long time.

Subscription-based programs means that I am locked in forever to a payment plan. The upgrades may be included, but I am buying them. It also means I have to be connected to the internet to use. No more working with the program on an airplane (unless WiFi is available and I elect to buy access). The same is true for working in hotels, etc.

I prefer to buy and own the software that I want and use. Hopefully there are enough consumers who feel the same way that Adobe and others will continue to offer boxed or downloadable versions.

Jason Goldberg
BrainTrust

I admire Adobe’s willingness to be a pioneer in these new pricing models.

I’m sure that they will continue to experience friction as they migrate their user base, but in the long run, I do see users adopting this model.

Unfortunately, the era of brick and mortar retail selling software was over before this move. Digital distribution has all but eliminated retail distribution of software already. GameStop is really the last remaining retailer to feature software as a primary part of its merchandising mix, and as more and more of the new game hardware devices feature direct download software, GameStop is fighting an increasingly uphill battle as well.

Ben Ball
BrainTrust

Unfortunately for those of us who buy software and then run it until it a) is no longer supported and b) finally breaks—this is the face of the future. It is akin to only being offered the option to lease a car, not buy it and drive it as long as you like. And it is indicative of just how much influence and importance the software companies now feel digital tools have in the average consumer’s world.

But perhaps the law of unintended consequences will rear its ugly head yet again. Perhaps even those of us too Microsoft dependent to ever consider “freeware” options as too scary and unconventional will change our minds. There are still a lot of folks paying for AOL who have never changed. But that user is a vanishing breed. We may all get much more creative as Big Software tries to extract a higher toll.

Cathy Hotka
BrainTrust

A big thumbs up. So many new computers don’t even have CD drives. Adobe will eliminate overhead costs, and other software publishers and music companies will follow.

Mark Price
BrainTrust

Adobe’s move is bold but very timely. Consumers and businesses are showing a marked preference for subscription services and the broad range of products that Adobe offers makes a compelling case. The goal is to “lock up” consumers and businesses into relationships that can be used as a strategic block to Microsoft and other competitors.

Should be successful.

Robert DiPietro
BrainTrust

Boxed software is clearly going away and retailers could just sell a ‘key code’ to unlock the subscription and maybe collect the first month then a residual off the following months. I don’t think selling it in retail stores will go away, but the packaging will.

I’ll bet other software firms are testing this model and you will see other announcements soon enough.

Kevin Price
Guest
Kevin Price
4 years 2 months ago
The concept of ‘locking up’ customers is a great one, first and foremost, for Adobe. Add to this idea ‘lower costs/higher profitability’ associated with abandoning boxed items (and abandoning having to share margins with a retailer) as well as the far lower costs associated with issuing updates and bug fixes, and everything appears rosy! What I suspect nobody really knows, including Adobe, is how customers will ultimately react. There are several customer benefits associated with downloadable/installable software that, in my mind, are extremely valuable (to me, anyway) that Adobe is walking away from, potentially devaluing its products (e.g., no WiFi required, ability NOT to have to pay for an update with every new release, NOT having to re-learn how to use the software when changes are made, etc.), not to mention that I’m not really interested in ‘buying’ or paying for ALL their products if I only need one. Yes, a very bold move, seemingly and obviously moving in the direction of the overall trend. But with boldness comes risk. For their sake, I hope they’ve done the right customer research homework so their risk will be successfully managed because, if they haven’t, this move could be disastrous for the… Read more »
Lee Kent
BrainTrust

For the professional user, this is a great move and possibly win-win for both. However, for the casual user, such as myself, it is hardly worth the subscription fee for the amount I use the software. I am perfectly happy with my old Photoshop because it does what I need it to do.

Adobe needs to make sure that they are addressing their entire customer base. Even though the casual user is not their bread and butter, do they really want to lose that channel?

Shep Hyken
BrainTrust

The cloud is where it is at! I don’t know what all the big fuss is all about. Software companies have been moving to the cloud for a while. How to package a cloud based product is a different story for the retailer.

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