Adobe Systems Incorporated: On Creative Cloud nine? adds "Adobe Systems Incorporated: On Creative Cloud nine?" report to its research store.

In May 2013, Adobe announced that it intended to exclusively operate a cloud-based business model for future versions of its popular Creative Suite product - moving from packaged software and perpetual licenses towards subscription-based licensing. This case study contextualizes the company's Creative Cloud strategy, analyzes its success so far, and identifies its future potential.

Features and benefits

  • Learn the reasons behind Adobe's shift to a subscription-based model with Creative Cloud.
  • Identify Adobe's level of success so far with Creative Cloud, as well as its long-term potential.
  • Analyze Adobe's Creative Cloud strategy in terms of its pricing and target customer base.

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Adobe's creative software has become its largest revenue stream and its flagship product, Adobe Creative Suite (CS), which includes a number of Adobe's creative software products in one package, has grown in popularity. The high price of this product has, however, limited individual consumer uptake and led to a high rate of piracy.

Adobe has increased its presence in the software as a service (SaaS) market with Adobe Creative Cloud (CC), a subscription-based alternative to CS. In May 2013, Adobe announced its intention to discontinue the development of further CS products; instead shifting entirely to a subscription-based model for its creative software products.

Transitioning to a subscription-based business model has negatively impacted Adobe's total revenues and net income over the past few quarters. However, this is a side effect that was expected by Adobe, and its share price has continued to rise in spite of lower earnings.

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Your key questions answered

·         What is Adobe's history in the software market, and how has it become a leader in creative software?

·         What have the negative impacts of Adobe's historical perpetual licensing strategy?

·         How is Adobe seeking long-term growth with its Creative Cloud offering?

·         How has Adobe's shift to a subscription-based revenue model impacted its financial performance?

Table of Contents






Adobe's Software Heritage

Creative software is Adobe's cornerstone

Creative software offered at premium, one-off cost

Industry shift towards cloud software and SaaS


Adobe's Creative Cloud Strategy

Creative Cloud replaces Creative Suite

Creative Cloud can be priced attractively

Creative Cloud offers reliable, recurring income

Creative Cloud counters piracy


Creative Cloud's Success So Far

Revenues and profits hit by shift to subscription: share price rises

Creative Cloud uptake strong, recurring revenue rising

Adobe encouraging cheaper subscriptions in spite of negative impact on ARPU

Ambitious targets continue

Creative Cloud updates, new releases continue

Creative Cloud already pirated



Adobe's Creative Cloud and subscription strategy has long-term potential





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List of Tables

Table: Creative Cloud individual subscription plans, monthly and yearly cost, $, as of June 12, 2014


List of Figures

Figure: Adobe segmental revenue breakdown, FY2013, %

Figure: Adobe revenue growth vs. unlicensed software value growth, 2007-11

Figure: Adobe revenue growth vs. unlicensed software value growth, 2007-11

Figure: Adobe quarterly total revenue and net income, $m, Q1 2012-Q2 2014

Figure: Adobe weekly share price close, January 2010-June2014, $

Figure: Adobe subscription revenue and gross margin by type of product, FY 2008-13, $m, %

Figure: Adobe quarterly Creative ARR and CC subscribers, $m, millions of subscribers, Q2 2012-Q2 2014


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