Adobe’s Public Relations Disaster
Could a more sophisticated activity-based billing solution help save Adobe Systems from a public relations disaster? The company caused quite a stir recently with its announcement that, moving forward, it will only offer its popular Creative Suite as a subscription service, rather than by selling perpetual licenses to its software at a flat rate as it has done for years.
For example, Photoshop will now cost $20 per month, rather than $650 -- its most recent shelf price -- and the full Creative Suite, which enhances Photoshop with applications like Illustrator and Dreamweaver, is now priced at $50 a month with a one-year commitment, rather than $2,600 for a lifetime license. The company states it will continue to support and distribute existing software but with no feature updates. Furthermore, no future version of core products will be available through a perpetual license.
Adobe Users React
The reaction of Adobe users was immediate and furious. On articles and blogs announcing this change, user comments ran at least ten to one against the move, with many comments harsh and even brutal criticisms of the decision.
Small businesses and freelancers seemed especially taken back by this decision. One put it this way, "There are a lot of creatives who buy software and keep it forever. For them, the Creative Cloud is exorbitantly more expensive if they previously chose to only upgrade every few years. It’s a really tough situation and one where, amongst the folks I've talked about this with, we think Adobe is really missing the mark. There are a lot of angry people out there because people hate feeling forced into things they don’t want.They can’t invest.That’s the real issue."
Teachers also weighed in. One lamented, "The cost of the subscription, even at the educational discount, it a complete non-starter with our budget considerations and those of our students. A student wanting just the suite for a semester will be forced to sign up for 12 months instead of just the 4 he/she needs."
Angry users even circulated an online petition asking Adobe to eliminate the mandatory "Creative Cloud" subscription model. To date, the online petition has nearly 21,000 signatures.
Why Did They Do It?
Since this has clearly been a public relations disaster, we have to ask, why did Adobe make this move? According to Adobe, with the perpetual license model, product updates had to happen on a fixed schedule. If engineers wanted to push out a new feature for Photoshop, they had to wait until the next release of the software -- typically 18 months -- meaning the product couldn't be on the cutting edge with support for the latest web technologies.
There is also the issue of piracy. It is known that a huge percentage of Adobe users have illegal copies, and the move to subscription-based licenses (according to Adobe) will certainly mitigate that problem, though many experts agree with time motivated users will eventually find a way to pirate Creative Cloud as well.
More significantly, services are becoming an important component of Creative Cloud. In the last few years, Adobe has acquired a number of startups, such as Behance, in order to add collaboration and web services to its product line. "Our single highest priority has to be about blending tools and services and in order to do that, we have to make [Creative Cloud] our full focus" an Adobe representative told a Mashable reporter explaining the change.
Burning the Future
We should note that on the surface (and I say that lightly), the program seems to have been a success. More than 500,000 premium members have signed up for Creative Cloud in the first nine months of availability, in addition to the 2 million users using the free Creative Cloud suite. Given the healthy demand for the new subscription service, it appears it is mostly the abrupt elimination of the old perpetual licensing model that caused all the outrage.
Many large companies, however, go to great lengths to nurture the "next generation" of their user base, and in many ways this move burned not only Adobe, but a good portion of their existing customer base as well. This should have been more than a simple "bottom line" pricing strategy - all implications of this decision should have been considered.
First, and probably most important, Adobe is currently the "de facto standard" toolset for designers and creative professionals. Did they really want to jeopardize that position? Second, "casual users," which are defined as hobbyists and small freelancers, should not have been ignored. Collectively they represent an important future market for Adobe, and now they are just angered. And now more than ever they have access to alternatives. Many users said they will be turning to Gimp, Paint.net or other open source programs to fulfill their creative needs in light of Adobe's controversial move to forced subscriptions.
A Better Alternative
The real tragedy? Adobe has alienated the very market and demographic they should be nurturing. With a more sophisticated activity-based billing system, Adobe could have made the transition to a more modern business model less painful to their user base while still ensuring their market position for many years into the future. With activity-based billing, companies such as Adobe can increase revenues by leapfrogging ordinary subscriptions and adopting dynamic billing solutions based on customer usage rather than a one-size-fits-all pricing strategy that only works for a portion of their users but ostracizes another.
Conversely, it’s important to note that subscriptions mature and diminish in value over time due to competitive offers and commoditization. What will happen when Adobe is faced with another major competitor that thousands are crying out for? Having the option to bill customers based on their usage gives a company the advantage to evolve their offers as their customers mature, and introduce new packages that will increase customer lifetime value.
Now Adobe is ripe for disruption, but it is not too late for Adobe to do the right thing and offer a more scalable billing solution to their current and future customers since chances are, despite frustration, many won’t back out of their newly-forced Creative Cloud subscription model.