Adobe profits are falling since Creative Cloud. What do you think they will do next?

An Exception · 10 Mar 2015 at 15:50

Adobe says it is increasing it's CC subscriptions considerably, however it also says it's margins have reduced considerably.
This means Adobe has been offering teaser rates to increase it's subscription numbers at the expense of margin. So far this strategy of transitioning to a different business model has cost Adobe hundreds of millions in lost profits.
Unless Adobe's goal is to earn less profit, it will eventually have to begin raising subscription fees to be at similar profit levels prior to creative cloud. It could possibly increase them further if it wants to recoup some previously lost profits and increase profitability moving forward.
Currently the photographer deal of £8.57 per month for lightroom and photoshop is considered a bargain for most people.
However how long can/will Adobe keep pricing this low?
and
How much are you willing to pay PM for photoshop and lightroom?

http://www.pcpro.co.uk/news/390835/dark-clouds-for-adobe-as-profits-slide-by-46

An Exception · 10 Mar 2015 at 17:02

I've been looking at capture one as an option for the future. I use FCPX anyway as I prefer it over premier.
I'm also sure elements is more than enough for my uses.

An Exception · 10 Mar 2015 at 19:19

wonder_lander said:
Personally I'm on the photography bundle and find it a bargain for Photoshop and Lightroom.

At what point is it not a bargain.
Is £25pm, £35pm, £45pm still good value?

An Exception · 11 Mar 2015 at 09:13

kitfit1 said:
Interesting one this. Of course we are all interested from the photography point of view, but keep in mind Adobe is about a lot more than just PS and Lightroom. I'd hazzard a guess that Lightroom and PS are quite a small part of the overall software income they generate. So although they are saying CC subscriptions will go up.................they havn't yet said which ones will go up and by how much. Because the photography package (Lightroom and PS) is so good they will have gained a lot of paying customers that would have simply used pirated software before CC. I wouldn't be surprised if they actually make more money from the photography CC package than they did from selling licenses previously.

I would hazard a guess that photoshop is probably one of their most profitable pieces of software.
http://www.businessinsider.com/chart-of-the-day-adobe-revenue-2010-5?IR=T
Personally I hope you are right and there is a reduction in piracy. This will allow for competition to compete with Adobe. Without that competition Adobe has (until the CC transition) been pretty much able to name it's price for software.

An Exception · 11 Mar 2015 at 11:38

Oddly Autodesks revenue is up, but profits are down over 80% from a year earlier supposedly due to higher costs they say???

"Autodesk's net income fell to $10.7 million, or 5 cents per share, in the quarter ended Oct. 31, from $57.6 million, or 25 cents per share, a year earlier."
Link

Edit:
Unless I have misread some slippery marketing speak somewhere, perhaps they were referring to an increase in subscription revenue rather than total revenue.

Edit2:
Ah here we go.
"License and other revenue fell 12% to $320.7 million, and subscription revenue increased 9.8% to $265.9 million."
Overall revenue is decreasing.
http://www.wsj.com/articles/SB10001424052702304255604579407740897340028

An Exception · 11 Mar 2015 at 13:42

al4x said:
Is it right to say that piracy actually keeps the cost down?

Would be interesting to see revenue from private vs corporate accounts

There are many forces pushing and pulling on each other.
Generally, consumer customers are very price sensitive, and companies that cater to them often run on incredibly thin margins. By contrast business customers are far less price sensitive, and there is much larger scope to increase product margins.

Without competing products, Adobe is free to name it's price virtually and business customers will pay whatever as they have no choice. Adobe can enjoy large margins in this scenario.
In contrast, much fewer consumers can afford or justify such expenditures like business customers can.
If there was no piracy, such consumers would be forced to use either free or cheaper alternatives. This would increase the revenue and profit of competing products. With this added revenue stream, competitors can begin to invest in R&D to more rapidly improve their products. Over time these cheaper alternatives will begin to match adobes feature set more closely as the software matures. At some point, business customers are going to have a viable alternative. When there is a viable alternative, suddenly pricing becomes a factor to the business customers. If pricing becomes a factor, this means squeezed margins for Adobe in order to maintain marketshare. Shrinking margins decimates profits as shown with Adobes CC pricing.

Fortunately for Adobe, piracy exists. These smaller companies trying to compete are unable to get their foot in the door. Why? because they cannot compete with free.
This is probably why Photoshop's strongest competitor is GIMP, which is free.

http://www.gimphoto.com/2007/08/features.html

An Exception · 11 Mar 2015 at 14:08

englishpremier said:
I too much prefer PCPX to Premier. Simple but powerful.

I haven't tried Capture one, but I do like Lightroom.

Photoshop I can do without.

I haven't tried capture one yet. From what I can tell it's missing 3rd party tool support. I use things like VSCO keys which is critical for me.
So I'll keep using lightroom until it becomes a CC only app. By then hopefully capture one will be where I need it. By all accounts it has a very good raw processing engine.

An Exception · 11 Mar 2015 at 15:13

Adrianr said:
one day saying "Yeah, £100 a month now please chaps, if you don't like it there's the door".

That's a big one for me, as well as the fact they know once customers have 'accepted' subscription pricing, they can charge more annually if the payments are spread over monthly instalments.
The next biggest thing is once the transition phase has past, it removes the incentive to invest in R&D as income is guaranteed. Investing in new features simply becomes an unnecessary expense to the accountants.

An Exception · 11 Mar 2015 at 21:02

Rojin said:
Maintaining a competitive product is only linked to the licensing model on cost. If the product lacks features the buying public will move on. If the Adobe photographer bundle becomes too expensive for me or gets left behind, I have no problem moving to whatever the new better product is. Currently you can still get a standalone LR install to view/print your catalogue after you stop a subscription, you just cannot edit. As long as they stick to that I'm happy enough.

That only happens with competition. It will be a long while before adobe actually has to start looking over it's shoulder, instead they can just potter along.

An Exception · 11 Mar 2015 at 22:33

Indeed. However your currently enjoying honeymoon pricing. Clearly the subscription model itself doesn't work for a large number of folks (especially the non-pro's), else Adobes profits wouldn't have fallen off a cliff.

An Exception · 15 Mar 2015 at 11:11

^^^
Those SaaS policies are freaking creepy, 1986 style.

An Exception · 15 Mar 2015 at 13:58

Genoma said:
On the flipside many more people probably bought it. Amateur photography and associated tooling is much more far reaching now that it was a few years ago.

I would guess keen amateur photographers probably out number Pro's in an order of magnitude.
Also halving the price of lightroom probably kept allot of people choosing to use capture one/aperture.