Cloud growth doesn't offset Adobe's $267m software shortfall

Adobe has signed up one million users to Creative Cloud in the year since its launch.

Adobe first announced the Creative Cloud subscription suite last year, but this May declared customers wouldn't be able to buy new versions of Creative Suite on a perpetual licence - effectively pushing users to the subscription model.

While the subscription model may work out less expensive for some users, others weren't pleased - with some even starting an online petition against the move.

Now, the software developer has announced that Creative Cloud has passed the million subscriber mark. It's difficult to say how much of an achievement this is, as it's unclear how many people actually use Creative Suite.

CEO Shantanu Narayen said that the results showed "that the transition to Creative Cloud is happening sooner than expected", while CFO Mark Garrett said customers were "overwhelmingly choosing subscriptions instead of perpetual model licenses".

Subscriptions certainly are selling more quickly in the past few months than earlier this year. The number of Creative Cloud subscriptions sold hit half a million in the first quarter of the year, well before Adobe announced users would eventually have to switch to the model. But while it took a year to hit that point, it took only half as long again to add another half a million customers.

According to Adobe's financial reports, sales of Creative Cloud subscriptions hit 8,000 a week in summer of 2012, and doubled to 17,000 by the end of May this year. In May, Adobe was offering discounts to sign up early, which likely helped.

In the period from the end of May until last week, the average subscription rate climbed to 20,000 a week - the increase likely helped by the release of updates to key Creative Cloud applications.

The increased Creative Cloud sales are already showing up in Adobe's revenue. Revenue from subscriptions - which include Creative Cloud and Adobe's marketing products - grew from $160 million (A$168 million) in the second quarter of 2012 to $255 million (A$268 million) in the same quarter this year.

However, at the same time, revenue from standalone products has fallen, from $871 million (A$916 million) to $645 million (A$649 million), a $226 million (A$267 million) shortfall that hasn't been made up by the increased subscription sales. (Adobe also counts revenue under its support and services, which the chart below doesn't include.)

It's worth nothing another milestone for Adobe: Q3 2013 is the first quarter in three years where Adobe's revenue has fallen below a billion dollars, with the company posting sales of $995 million (A$1.046 billion) and net income of $83 million (A$87 million).

The difference is that subscription payments will keep adding up as the million users on Creative Cloud keep steadily paying for the software indefinitely, rather than paying a lump sum up front. As Garrett noted, subscriptions lead to a "more predictable revenue model".

"During Q3, 41 percent of our revenue was recurring and we exited the quarter with record deferred revenue on our balance sheet," he noted.

This article originally appeared at pcpro.co.uk