If Everyone Hates Adobe, Why Is It Pulling in Record Profits?

Last week, Adobe reported that the fourth quarter of 2019 was the most lucrative in the company’s history, delivering annual revenues of $11 billion. Given that it’s rare to hear a good word said about Adobe in the world of photography and videography, why is the company still so incredibly successful?

You don’t have to look far to find photographers complaining about Lightroom: it’s slow, its masking functionality is put to shame by the likes of Capture One, its ability to edit skin tones is surprisingly limited, and the workspace cannot be customized. The near-unavoidable Creative Cloud Desktop app is bloated, constantly up-selling, and frequently misleading. Perhaps by far the biggest bugbear bemoaned by customers is the subscription model: no other photo editing software ties you in for 12 monthly payments with the ever-present threat that the price could be hiked at any moment. 

For many photographers, Adobe has them tied into a contract and thus has no incentive to innovate, fix bugs, or offer significant upgrades, but it’s not just photographers who are complaining. I’ve heard from more than a few videographers and filmmakers recently who have announced their move from Adobe Premiere Pro to DaVinci Resolve, citing stability issues and corrupt project files. Premiere can be buggy, especially if you’re on a PC running hardware that’s more than a few years old. Many users complain of customer support being incredibly slow responding to inquiries, bug reports that are seemingly ignored, and that the beta forums for some packages have become farcical.

Is Adobe Too Big to Care?

The recently launched version of Photoshop for iPad seemed indicative of how Adobe now treats its customers. No doubt, huge companies draw greater criticism simply by virtue of being so huge, but for many, the car crash that was Photoshop for iPad demonstrated a complete lack of respect for users. Instead of getting enthusiastic fans on board by exhaustively testing and evolving a new product, Adobe seemed to rush it to market, creating an application that received countless caustic reviews.

Given all of these problems and the emergence of so many competitors — Capture One, Skylum, and Affinity to name but a few — why is Adobe still proving so unbelievably successful? Creative Cloud subscriptions account for the largest part of Adobe’s revenues, and from the noise, surely, dissatisfaction and customers migrating elsewhere would have an impact? Apparently not, and shareholders must have been delighted when Adobe’s share price spiked by more than 4% on December 12 at the news that revenues for the year were in excess of $11 billion.

That is a phenomenal amount of money for a company that makes niche software. This is not an operating system that is integral to every machine out there or a word processor that even your nan needs to have installed. This is hardcore, professional-level, commercial software with a comparatively limited customer base. Through sheer innovation, Adobe established itself as the industry standard across numerous professions, but how long can this last? Apparently, for the foreseeable future.

The Subscription Tsunami

Adobe realized early that software as a standalone product was not going to deliver profits forever. Eventually, demand was going to drop-off — potentially coinciding with a slackening of innovation from its developers — and Adobe was smart in predicting that its sales would reach saturation point. The number of new customers would eventually decline, and those who already owned the software were not about to blow a chunk of cash on an updated version that was barely an upgrade.

Software as a service was the future, and it brought other hooks and advantages as well. Tapping into customers’ Gear Acquisition Syndrome was now much easier: users might feel reluctant to hand over several hundred dollars for something that offered only an incremental improvement, but paying $10 a month to know that you were always using the latest and greatest version was reassuring.

Secondly, cloud service companies such as Dropbox were already using this model, and if this type of functionality could be bundled into the deal, it would both justify the ongoing fee as well as trapping customers into an ecosystem. If your raw files are all in Adobe’s cloud, while it’s not impossible to move systems, it definitely gives you an extra incentive to stay put. Encouraging lethargy is a great way of retaining customers.

Thirdly, this model can feel to many like a monthly subscription but is in fact an annual subscription that is paid by the month. Opting to pay for the entire year in advance will not save you any money, and even if you choose to pay for 12 months, Adobe will hang onto your card details so that it can process the renewal when it comes around. (Given that Adobe inadvertently exposed the data of 7.5 million customers a few months ago, this might not be ideal if you’re protective about your information.) This monthly fee feels less expensive, and psychologically, it gives you the misguided sense that if your circumstances suddenly change, this is a financial burden that can be immediately canceled. Of course, it’s not that simple: there is a fee if you want to cancel your contract early.

The final piece of this puzzle that secured Adobe’s transition from goods to services, from selling to renting, was the disappearance of the option to purchase outright. While subscription and standalone options stood side by side for a while, sales of Lightroom 6 stopped earlier this year, with the last copies being snapped up from online retailers in March and April. You might recall that back in 2013, Adobe promised users that it would always offer a standalone version of Lightroom available to purchase with a perpetual license: “Future versions of Lightroom will be made available via traditional perpetual licenses indefinitely,” its blog calmly explained.

So, was Adobe telling the truth as it saw and things then changed, or was it telling customers what they wanted to hear to prevent unnecessary upheaval?

The Photography Bundle Is Massively Discounted

In Adobe’s defense, it could be argued that the plan for photographers is comparatively cheap. Lightroom and Photoshop together come to $9.99 a month, which seems like a bargain when you consider that Photoshop as a single app is $20.99 per month. Why anyone would choose to pay for Photoshop on its own considering that it’s less than half the price if you rent it with Lightroom is a mystery, but that’s the standard fee for individual apps.

As the model goes, it makes sense. There are millions of amateur photographers willing to pay a small fee per month that probably wouldn’t pay a large fee. Adobe gets a ton more customers, which more than outweighs the reduced price — a million customers paying $10 a month pulls in more revenue than 100,000 customers paying $20 a month. By contrast, there are far fewer video editors or designers than photographers, and they will pay more for an individual app, especially when it’s more likely to be a profession.

The problem starts when, as a photographer, you have Lightroom and Photoshop, but want to do some video editing. Adding Premiere — one single application — to your bundle triples the cost of your subscription. Because of this, I opted to buy Affinity Publisher outright for around $50 rather than rent InDesign for the year for more than $250.

Not only that, but one has to wonder how long this Lightroom/Photoshop photography bundle will last. Earlier this year, Adobe claimed that it was “testing” new pricing options when visitors to its website noticed that Lightroom as an individual app was $9.99, but bundled with Photoshop, the price was suddenly $19.99. Perhaps this was some A/B testing happening in certain parts of the world, but if those are the options when renewal time comes around, many will be ditching Photoshop and paying a one-time fee for Affinity Photo or Pixelmator Pro in its place.

If Adobe decides to implement this change, there is a chance that customers renting one app rather than two will then be more inclined to ditch Lightroom completely in favor of something else. Hopefully, for us customers, that’s enough for Adobe to hold off.

Will the Competition Follow Suit?

What seems more likely is that competitors will follow suit with the subscription model. No doubt, lots of small software firms initially saw Adobe’s move and thought they’d been given a up: while Adobe would push customers away with subscriptions, they could Hoover them up by continuing to offer one-time fees. However well that may have worked for Adobe’s competitors, Adobe has proven that the subscription model is lucrative, and it may only be a matter of time before one-off purchases become a thing of the past across the industry. Affinity and Pixelmator are both a single purchase, but they’re still under heavy development, and while many professional users will have migrated, Adobe still has a very stiff hold of the industry, and one-off fees make these alternatives stand out — for now.

Capture One currently offers both a one-time fee and a subscription, but will it eventually follow Adobe’s lead and become subscription only? It has no plans to switch, but unlike Adobe, it doesn’t want to rule it out before possibly changing its mind.

Adobe Can Do Whatever It Wants, But for How Long?

This being a free market, Adobe can charge whatever it wants, and customers will decide what’s best, but Adobe’s dominance is going to take time to shift, and the company is clearly not afraid of exploiting its position. There’s a huge volume of tutorial content for Adobe products, and any budding young digital creative thinking of ditching freelance life and working for an agency will be expected to know Adobe products inside out.

Fortunately, companies such as Affinity are leading the charge and seem to have the funds to be able to offer their software at very affordable prices. Right now, Affinity Photo is just $49.99, and a perpetual license costs less than two and a half months of Photoshop. If and when the Lightroom/Photoshop bundle gets its price hike, I highly recommend reading this article from Fstoppers' Wasim Ahmad and doing the 30-day trial.

In time, Adobe’s slowing innovation, dishonorable marketing tactics, and lack of respect for its customers may have an impact, especially as competitors match features, produce more tutorial content, and continue to undercut Adobe on price. Revenues might be at record highs for 2019, but as 12-month contracts begin to expire and the alternatives keep getting better, 2020 might be a different story.

What are your thoughts? Leave a comment below.