Creative Cloud Subscriptions Profitable for Adobe
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Published on March 20, 2017
Subscriptions to Creative Cloud are highly profitable for Adobe. Today the software maker reported quarterly revenue that exceeded expectations, which led the stock price for Adobe Systems Inc. (NASDAQ: ADBE) to climb to record levels, up 6.5% reaching a high of $130.30.
Understanding the Creative Cloud Subscription Model
Many creative, marketing, and design professionals complained about being forced into paying monthly or annual subscriptions to Adobe for Creative Cloud software. Under Adobe’s previous business model, customers could buy Creative Cloud software such as Photoshop and InDesign by paying a one-time license fee that enabled use of the software forever. Adobe has stopped selling perpetual licenses of its new products, requiring that buyers instead purchase a subscription to the Creative Cloud.
How profitable is Creative Cloud
Adobe says they sold $1.73 billion in software licenses in their quarter. Shareholders saw a profit of 93 cents per share of stock. The move to the subscription model has created a recurring revenue stream for Adobe, as customers must continue to pay year-over-year to use the Creative Cloud software applications. Adobe followed the lead of digital design software vendor Autodesk in implementing the subscription model.
In describing the strong profitability of Adobe Creative Cloud, the company CEO Shantanu Narayen said, “Digital transformation has created a tailwind for Adobe among a diverse spectrum of customers in a broad number of industries. From students to designers to the public sector and the world’s largest brands."
Anticipated Growth of Creative Cloud
The most recent quarter showed Creative Cloud subscriptions and profits rising 22% and Adobe projects strong growth going into the future. For the current three-month quarter, Adobe expects to see growth of just under 25% with strong profits continuing from Creative Cloud subscriptions.
Adobe also has a division focused on marketing automation and technology. This other division is expected to grow at a slightly faster pace, and also contribute to Adobe’s profitability.
About the author
Christopher Smith is president of American Graphics Institute in Boston, Massachusetts. He is the creator and editor of the Digital Classroom book series. At American Graphics Institute, he provides strategic technology consulting to marketing professionals, publishers and to large technology companies including Google, Apple, and Microsoft. He delivers workshops relating to digital marketing, web analytics, SEO, and SEM. He is also the author of more than 10 books on electronic publishing tools and technologies, including the Adobe Creative Cloud for Dummies. Christopher did his undergraduate studies the at the University of Minnesota, and then worked for Quark, Inc. prior to joining American Graphics Institute where he has worked for 20 years.