The Psychology of Pricing and Ownership with Subscription Models

Yesterday was a milestone day for the creative industry that caused a lot of uproar and confusion around subscription models for software.

Adobe announced at their annual MAX conference that they will discontinue their flagship product, the Adobe Creative Suite, as stand alone product. Instead Adobe is introducing a new new offering for creatives, the Creative Cloud subscription.

The full offering for the Creative Cloud subscription will cost $50/month to new users, and $30/month to existing (upgrade) users. Going forward there won’t be a new standalone version of the Adobe Creative Suite that you can install without a subscription plan.

Initial Reaction

When I first watched the announcement during the keynote I didn’t think much about it. It just made sense. After all I have already been on the monthly subscription plan for the past year, and I never really questioned the pricing.

Paying $30 a month equals to about the same amount of money I would pay anyway for an upgrade every two years.

As a visual designer I use Adobe Photoshop, Lightroom, Illustrator, InDesign and Acrobat Pro on a regular basis. I always considered the ongoing price for the Adobe Creative Suite a personal investment. In return for my investment I got full ownership of the tools.

Reflecting on the Subscription

It wasn’t until I reflected on other subscription services that I started to see a flaw in the Adobe pricing.

For comparison, I have a monthly Netflix, Rdio and Spotify subscription. Each one of these services cost around $10/month for unlimited access and infinite choices.

The price point is so low that the monthly expense is not even an issue. It is so cheap that I never even think about ownership of the content or free (illegal) alternatives.

With these subscription services I pay for the convenience, the user experience, the consistency and the reliability. But most of all I pay because it is stupid cheap for what they are offering in return.

Adobe justifies their $30-$50/month pricing based on what the Creative Suite would cost you over a regular development cycle (18-24 months). Meaning that every two years you pay the full upgrade price for the tools without ever owning them.

The psychology just doesn’t add up. I am basically paying the same as before, but without the benefits of owning the tools. Do I want to own the tools? Not necessarily anymore! Do I feel like I should at the current price point? Absolutely!

Looking Forward

What’s the solution going forward? Let’s just speculate on a few plausible scenarios:

The Happy Cash Cloud
After the dust settles Adobe successfully converts the majority of their (pro and casual) users to the $30-50/month subscription model and the Creative Cloud becomes a happy cash cloud for Adobe.

New Market Opportunities
Consumer hesitation and disruption in the marketplace create new market opportunities for other tools. Maybe more competition is exactly what we need again in the creative industry.

Adobe’s decision to kill Fireworks can also work against them. There is no guarantee that people who used Fireworks will automatically switch to Photoshop. After all there was a reason they didn’t use Photoshop in the first place.

Price Adjustment
Adobe realizes their pricing is flawed and they start offering a lower subscription model where people don’t even question the monthly expense nor expect a sense of ownership. Or offer a model where you only pay for selected features that you use (in app purchases).

Sweeten the Offering
Just like Rdio or Spotify, Adobe can sweeten the offering to make $50/month feel like a bargain. And they are already doing that in some ways, but it is starting to feel like a cable TV deal with bad channels. And no matter how you dress it, $50 a month just sounds like a lot.

End of the Line
Photoshop users finally realize that Photoshop, the Adobe flagship product, has not advanced that much over the past decade and they decide to stick with their current version until the next Zombie Apocalypse.

I have been using Photoshop since version 2.0 and besides the introduction of layers and maybe layer effects not much has changed that drastically impacted my workflow and daily selection of tools. Of course everybody has their own workflow and feature requirements differ, but most of the tools in the Creative Suite have remained the same while the underlying foundation has advanced along with the operating systems.

Design Trends Will Adopt
Trends towards simpler designs and programmatically interfaces with fewer dependencies for graphic assets will continue. Further reducing the need for expensive image editing tools to prepare assets. Modern browsers and CSS have come a long way since the Creative Suite was first introduced.

In Summary

For now the subscription model won’t make a difference to me, but it sparked an important discussion about the right pricing and questions about ownership in the context of subscription models.

I am already on the $30/month subscription plan and will stick with it for now. However for Adobe to succeed as leader and visionary in the creative industry, they need a solution that appeals to the long tail of (casual) creative users.

Related reading… Techies and Normals by Chris Dixon.