Adobe has posted a 46 per cent year-on-year drop in net profits, placing its strategy of shifting customers to cloud subscriptions into doubt. For two years, the company has tried to stop punters making one-off purchases of software and move them on to Creative Cloud subscriptions.
It worked well initially but it seems that the results are not that good with Adobe blaming higher operating expenses and weaker profit margins for the sharp dip in profits.
Revenue from Adobe's digital media business, which includes Creative Cloud, fell by more than 2 per cent in the third quarter. It is not because customers did not like the idea. Adobe added around half a million subscribers. The company says it has 2.8 million Creative Cloud customers, up from 2.3 million in the previous quarter.
What appears to have happened is that Adobe has success converting enterprise customers to Creative Cloud, small businesses and individuals are more reluctant to sign up for rolling subscriptions, and are sticking with older versions of products such as Photoshop and InDesign.
Adobe recently introduced lower-cost subscription packages for photographers, which include Photoshop and Lightroom for a quarter of the original price.