Adobe (NASDAQ: ADBE) Creative Cloud Subscriber Growth Slows

Adobe Systems (NASDAQ: ADBE) added 517,000 subscribers to their Creative Cloud service in the first quarter of their fiscal year. This is a drop from the 644,000 subscribers added in the previous quarter. The drop in subscribers also was steeper than expected. Adobe Creative Cloud still has 3.97 million subscribers, an impressive number. Yet with the growth slowing, the question remains as to how many more of Adobe’s software customers will switch to to the subscription product. Adobe claims they will reach 5.9 million creative cloud subscribers by the end of the current fiscal year, over the next 9 months. Yet the slowing of the expansion of their customer base could signal that they are reaching the saturation point for creative cloud customers.

Adobe previously sold versions of their software as part of a perpetual license, which you could buy one time and own forever. Millions of those customers may choose to never upgrade to the Creative Cloud, even though the older software is no longer being updated. In order to get the latest features and capabilities, users need to subscribe to Adobe’s Creative Cloud services.

Of users that subscribe to the Creative Cloud, many are electing to subscribe to only a single product. Rather than subscribing to the entire suite of products, they may elect to use only one tool, such as Photoshop. American Graphics Institute (AGI) analysts believe that this trend is likely to continue, and Adobe will find it increasingly more difficult to get existing Adobe software users to subscribe to the entire suite.

One key issue is that the software was mature at the time Adobe moved to the subscription model. Most Adobe tools were 10 or more years old, and had already gone through many innovations by the time they reached the Creative Suite 6 version, which was the last version available before Adobe moved to the Creative Cloud. Many users who have not switched to the Creative Cloud are finding that they don’t need any of the minor enhancements that Adobe has added since switching to the cloud model. As such, many individuals and companies are subscribing to only the single product that they need, and continuing to use the older versions of the applications, which continue to work well.

Another obstacle Adobe faces is the lack of compelling cloud offerings. Right or wrong, the Adobe Creative Cloud is seen by many as nothing more than a subscription version of the software tools, with no other reason to subscribe. Adobe also risks alienating users, as they seek to provide more fee-based services to Creative Cloud customers. These are likely to include charging for stock photography use from the recently acquired Fotolia service.

Adobe does have a built-in audience with any new creative professionals that enter the job market. These new users are likely to become subscribers as the labor market grows. The balance of new job entrants versus those leaving the market is likely to be positive, yet the creative market is not growing at nearly as rapid a pace as it once was.

To broaden its offerings, Adobe has expanded to offering marketing services, and general business services. It’s marketing cloud includes analytics tools, personalization, and ecommerce capabilities, while its document cloud targets enterprises that need to share and organize large volumes of documents.

American Graphics Institute provides consulting services, Adobe training classes and assists organizations in learning to use Adobe tools and technologies. With offices in New York City, Boston, and Philadelphia, AGI provides services relating to Adobe technology to more than 5,000 corporations.