Adobe Makes Fundamental Shift in Business Model with Giant Leap into Cloud

MAX, the “creativity conference,” has humble beginnings as a Macromedia event for developers. Those beginnings were likely lost on most of this year’s 5,000 attendees from countries rises – a record number for a conference that seems to know no limits.

This sentiment was echoed by Shantanu Narayen, the chief executive officer of Adobe, who opened MAX’s first keynote by noting that “there are literally no limits much how much content we can produce and share today.” It’s not a profoundly new realization – this idea of sharing more in a day today than we used to in a century has been a reality for years – but it’s one that cannot be hammered into our heads enough. We still think with limits. Adobe wants to change that.

The company is doing its part by continually adding mind-melting features to its suite of software products; manipulative effects on photos and videos that can be explained only in a visual demo because the one word that comes to mind is “magic,” and we all know magic must be seen to be believed. But greater than the features themselves is the fact that each time a new feature is added to Photoshop or Illustrator or After Effects with one use in mind, creatives conjure up thousands of their own unique ways to apply the cutting-edge technology. Which is exactly why it was necessary for MAX to expand beyond just a narrow developer’s conference into a fully fledged event that welcomes absolutely everyone: developers must collaborate with designers, who must collaborate amongst themselves as well. And MAX is the portal that makes this possible.

But something coursed through the veins of this year’s MAX, unmistakably bigger than the event itself. It is called the Creative Cloud. It is both a product and a philosophy. And it is the future of Adobe’s business, whether you like it or not.

 

 

Creative Cloud is not brand new, but its importance suddenly is. CC is the next evolution of Adobe’s business model and it is a dramatic shift from the old ways. Customers no longer buy a new edition of Photoshop or full creative suite every time Adobe ships an update. Instead, customers subscribe to the software, paying monthly for access to both the creative suite and the cloud service. What makes this shift so dramatic is the fact that this is now the only way to use these Adobe products now, save for those who already own older editions. It was once that way, and now it is this way. No transition period. No choice.

This will upset many users. Change always does.

It will now cost customers $50 a month to subscribe to the full creative cloud. Assuming you upgraded your creative suite with every update, the subscription will not cost you more, and may even be cheaper. But those who skipped updates will find themselves shelling out $600 a year, more over the long haul than they would have paid for every second or third product lifecycle. 

Cost aside, there are are several reasons behind this shift, most of which benefit end users. For example, potential customers who could never afford up to $2,000 for a creative quite can probably afford $50 per month. Adobe made its products more accessible. Another reason is easier updates. Once a new feature is created for, say, InDesign, it can be automatically added to all users’ app. No waiting for new features to ship with a next edition. Adobe has ironed out its product life cycle into perfect smoothness: no waiting, just updating. The product never becomes obsolete. A third reason surrounds what the Creative Cloud can offer, such as a much deeper integration between suite software and Behance, as well as with other users, and seamless cross-platform usage.

“We launched Creative Cloud a year ago and it has been a runaway success,” says Adobe’s vice president of digital media, David Wadhwani. “By focusing our energy and our engineers on Creative Cloud, we’re able to put innovation in our customers’ hands much faster.” A fourth reason, though you are not likely to hear it emphasized by an Adobe exec, is that CC better protects the company against piracy.

CC is both cheaper and more expensive for Adobe. On one hand, certain expenses such as packaging will be reduced to virtually zero. But on the other hand, the cloud will force Adobe to spend more on storage space. It also means analysts will stop looking at things like units sold and start looking at things like subscription numbers and annualized recurring revenue.

Sounds like huge changes, and they are, but let’s also not forget that the Creative Cloud is not new. It already has 500,000 subscribers. And even though most are, nobody should be surprised: as far back as three years ago Adobe has been testing subscription-based pay models in select test markets, according to Wadhwani. Still, the magnitude of the shift is not lost on him: “looking back on this in the future, this will be seen as one of the major pivots in Adobe’s history,” the executive told Techvibes in an interview.

Ultimately, CC is the right move for Adobe. Many users will be upset, especially enterprise customers, initially. But that will fade away. Adobe will alter and innovate its pricing model as necessary. And what’s left will be a better product with more features, smoother functions, and – at least for most customers – a lower price tag. As Narayen affirmed at MAX, “in a few years people will say, ‘How could I even image a Photoshop not connected to the cloud?'”

The new Creative Cloud suite is expected to launch June 17.