How Adobe Disrupted Itself
Adobe announced their 2015 Q4 financial results last week, and things are looking good for the San Jose company.
- 22% revenue growth
- Recurring revenue is up $350 million
- 2015 total revenue up 16%
- Creative Cloud subscriptions almost doubled over 2014
Just a few years ago, Adobe was a classic example of a company ripe for disruption. They made high end products that cost an insane amount of money. People used their apps because they were the best out there in most cases, but it's hard to imagine apps that cost hundreds of dollars each still commanding the market in 2015, it's just not how people pay for software anymore.
Meanwhile, apps like Pixelmator and Acorn were hitting the Mac and were very good alternatives to Adobe's core product (Photoshop) at a fraction of the price. I was particularly fond of Pixelmator, and was more than happy to plop down $29 for it when it first came out in 2007. It did 80% of what I wanted and cost less than 10% of what Photoshop would have costed me. It was never quite as good as Photoshop, but I was able to adapt my workflow to make it work in most cases.
But my loyalties switched right back to Adobe's apps when they introduced their Creative Cloud plans. I am on their Photography plan which runs me $10/month and gets me access to Photoshop and Lightroom. That's $120/year and I always have full access to the latest versions of these apps (there is no upgrade fee when new major versions come out every year).
Compare this to how I used to have to purchase these apps and you can see how Adobe got me in the door and finally give them my bank account info. If we look at Adobe's 2010 releases of Photoshop and Lightroom, those apps clocked in at $999 for Photoshop Premier and $299 for Lightroom. Wow!1
Adobe is still selling a premium product by average app standards in the modern era, and it is still priced higher than its competitors. But Photoshop and Lightroom are still the industry standards and I would argue that they are better than their competitors in almost every way. By getting the prices down to a much more manageable amount, they've managed to hold onto their old customers while also bringing in new people like me, who had never purchased Photoshop before.
And yes, I know that subscription models are designed to make you feel like you're spending less than you really are, and it's nicer to just pay once and own something, but even looking at it that way, it's going to take me over 10 years before I pay more for this Photography bundle than I would have spent on one release of Photoshop and Lightroom before the subscription model was implemented.
There may be a catch in here somewhere that I'm not seeing, but I think that Adobe has done a fantastic job of remaining premium while updating their monetization strategy to stay relevant in the current era. A+ job, Adobe.