Adobe has just reported a record quarter, spearheaded by a 41% jump in overall subscription revenues. At $803 million, Creative Cloud revenues were up 39% year-on-year, a boost the company is putting down to former Creative Suite pirates jumping ship. Meanwhile, however, Photoshop is still king of The Pirate Bay.
Ever since their official release, Adobe software products have been popular with pirates. Editing studio Photoshop has been the most enduring, appearing on pirates’ machines since 1990.
In order to innovate, in 2013 Adobe said it would move away from boxed ‘retail’ products and switch to a cloud-subscription model. This meant that the large initial outlay associated with its products could be exchanged for a more affordable monthly fee.
In July 2014, Adobe said the strategy was working, declaring that piracy had fallen. Just over a year later, Adobe was celebrating again, noting that casual pirates had been converted by the lower price of entry.
This week Adobe had more good news for shareholders. In the third quarter, the company generated more than $1.46 billion in revenue, up from $1.22 billion year-on-year. Creative Cloud, the company’s replacement for the old disc-based Creative Suite, accounted for $803 million in revenue, up 39% year-on-year.
In a Q3 2016 earnings conference call the discussion somewhat inevitably turned to piracy, with Adobe Executive Vice President Mark Garrett noting that mitigation is one of the company’s key aims.
“Our focus with Creative Cloud continues to be in three key areas; growing our core base of users, including migrating the legacy user base of Creative Suite users, addressing piracy and growing our installed base in the education market, driving new customer adoption in adjacent markets,” Garrett said.
Heather Bellini from Goldman Sachs wanted to know whether Adobe sees potential for additional revenue boosts as piracy is further eroded.
“Is there kind of a framework that we could think about in terms of the impact on top line growth that you can get from piracy reduction and are there things that you are doing that you are changing even more than you were kind of a couple of years ago to stay ahead of the pirates?” Bellini asked.
Adobe President and Chief Executive Officer Shantanu Narayen responded, indicating that a large proportion of recent growth can be apportioned to pirates jumping ship to become part of Creative Cloud.
“If you look at the macro level we used to sell approximately three million units of Creative Suite a year and if you look at the numbers right now of where we are with Creative Cloud, it’s clear that we have seen significant acceleration,” Narayen said.
“Without a doubt, a large part of that acceleration is people who want Creative Cloud and are no longer pirating Creative products, but are actually as a result of the low price and the value that we are delivering using the entire subscription-based offerings.”
Additionally, Adobe says it has taken other measures to clamp down on pirates, including action against people attempting to abuse trials and sites offering pirated copies.
“Once the trial expires [we’ve ensured] that they don’t have access to the products. And as you know, we have also shutdown places, online websites where people could buy a repackaged box,” Narayen said.
But while Adobe hasn’t been shy to detail its subscription revenues, the company has again refused to say how many subscriptions it has sold. This makes it difficult to compare, one for one, pirated instances of its software in use versus new subscriptions being taken up. During the call, Narayen offered no additional clarity.
“In terms of the installed base of pirates, I think the numbers for that are all over the map. But I think you can go back and look at the last numbers that we gave in terms of the addressable market and you would see that there is still significant headroom,” he said.
“Let’s get the markets that are most developed, let’s address casual pirates, let’s hit the enterprise and then let’s now expand that into emerging markets where there was more piracy and now we have the ability to counter that, both through pricing as well as through technology.”
Exactly one year ago, Adobe products occupied four of the top eight slots in The Pirate Bay’s most popular software download list, with Photoshop Creative Suite 6 taking the top position. In 2016, things haven’t changed that much.
As shown in the image above, Adobe products still share half of the top eight positions with Microsoft, but this time around Photoshop Creative Cloud has taken over at the top from CS6.
Not exactly the transition to the cloud Adobe had in mind of course, but maybe more pirates will subscribe properly next year.