What if You Didn’t Own Software Licenses?
May 7th, 2013As you know, when you buy an app, you don’t actually own it. You own the license to use it for as long as you like. And that can be a pretty long time, although new computers and new operating systems may make it impossible to use. So if you have Word 5.1a, released in 1992, which some consider to be the absolute best version of Microsoft’s word processor ever, don’t expect to have it work on your spanking new 2012 27-inch iMac.
That old version of Word was designed to work on a Mac using the original Mac 68K processor family. When Apple moved to the Power PC in 1994, there was a 68K emulator that allowed you to continue to use your older Mac software with somewhat less efficiency. But as Macs sped up, the emulated apps ran faster too.
In moving to OS X in 2001, Apple included a “Classic” environment that allowed you to run all those old apps in a separate window. There were some limitations that wouldn’t apply to Word, though Classic itself disappeared by 2006 with the advent of Intel-based Macs.
The main point, however, is that, without having to have an old Mac serving standby duty, you were able to use Word 5.1 on a reasonably current Mac for approximately 14 years. Nobody from Microsoft threatened to take your license away. It was yours to keep.
But software companies, particularly the larger ones, don’t expect you to run the same version year after year. Once they sign you up as a registered user, they hope you will continue to buy upgrades every two or three years, which can be a huge profit center, particularly at a time when sales of Macs and PCs have flattened. However, adding compelling new features to an app is increasingly difficult. Microsoft Office 2013, for example, seems to have precious few compelling new features. When you examine a typical Top 10 list, such as this one, it’s hard to find anything that actually makes you more productive. It’s more about adding touch support, and the ability to rent, rather than buy, your software.
Did I say rent?
Well, it appears one of the major success stories for Microsoft these days is the cloud-centered subscription service known as Office 365. What this means is that you agree to pay an annual fee for the software you want, and there are several packages that start with Home Premium at $99.95 per year. The fee also entitles you to SkyDrive cloud storage and other features. And, yes, you get a downloadable copy of the app to run on your Mac or PC.
Of course, when you stop paying, you’re no longer able to use the software. That’s a significant factor to consider if your income isn’t so predictable, which happens to many creative people who require such apps for their workflow. This “pay or stop using” scheme may keep a steady flow of cash in Microsoft’s bank accounts, but the customer suffers. While similar to a music subscription, you won’t lose the tools of your trade if you can’t play the latest music from Kenny Chesney or whoever.
With Microsoft, at least, you can still buy Office, so you aren’t forced to set aside an annual budget for keeping the suite active. That, however, will no longer be true if you want the latest and greatest creative software from Adobe.
This week, Adobe announced that they will not deliver a direct successor to Creative Suite 6. There will be no Creative Suite 7. Instead, they are moving to Creative Cloud apps. What this means is that, beginning in June, you’ll be able to download the newest versions of Photoshop, InDesign, Illustrator, Dreamweaver, Premiere Pro and all the rest for monthly fees. For the first year, users of Creative Suite 3 or later will be eligible for discounted monthly fees for the new Creative Cloud suite, beginning at $29.99 per month; students pay $19.99 per month. The fees will go up next year to $50 per month for a regular user (which means $600 per year).
But if you miss a payment, prepare to lose access to your software. I’m not going to go into the dirty details of the policies, and grace periods for late payments, but the overall impact is clear. Adobe wants you to pay forever. The change, according to a published report, will let Adobe engineers offer faster updates and more innovative features, though it is not certain as to why. Besides, if updates are frequent and ongoing, what about the major version upgrades that generate publicity and reviews? Has Adobe considered possible lost business as a result?
Fortunately, most software publishers haven’t adopted subscription-only schemes. From a company’s standpoint, they can be assured of consistent income, particularly from people who have no choice but to pay and pay and pay again until retirement. But it may also encourage users of Adobe’s CS software to stick with the versions they have and avoid this scheme. Yes, I suppose that the annual fees are probably little different than buying upgrades every couple of years, but at least you know that, once you pay for the app, a future financial calamity can’t put you out of business.
On the other hand, you also have to pay for your utilities and Internet access on a monthly basis, and they are critical to your livelihood as well. You don’t pay, your power goes off, the water stops working, and you lose your online access. Skip too many house payments, and it goes into foreclosure. So I suppose a monthly software subscription payment isn’t so unusual after all. However, Adobe’s current pricing model requires a one-year commitment; month-to-month is supposedly higher. If you fail to meet that commitment, you are still liable for 50% of the remaining charges. So I suppose Adobe may have to hire collection agencies to deal with people who fail to ante up if they break their contracts.
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“So I suppose a monthly software subscription payment isn’t so unusual after all. However, Adobe’s current pricing model requires a one-year commitment; month-to-month is supposedly higher. If you fail to meet that commitment, you are still liable for 50% of the remaining charges. So I suppose Adobe may have to hire collection agencies to deal with people who fail to ante up if they break their contracts.” More likely, the Adobe software you download will have a feature that it will “phone home” every so often, and check to see that you’re paid up. If not, it will stop working. Sorta like turning off your water if you don’t pay your bills.
I wouldn’t be surprised if Adobe, not unlike J. C. Penney, will discover you can’t just switch over to a new business model because you feel like it. The market has a mind of its own. Pretty soon JCP was looking for a new CEO, something of the kind might happen at Adobe tool.
@dfs, It’s not unusual for apps to check in with an activation server, so I do expect that’s how it’ll happen. I was only being slightly facetious when I suggested the need for collection agencies, though. If you break the contract and don’t pay the penalty fee, how do they get the money?
Peace,
Gene
[…] “What if You Didn’t Own Software Licenses?: As you know, when you buy an app, you don’t actually own it. You own the license to use it for as long as you like. And that can be a pretty long time, although new computers and new operating systems may make it impossible to use. So if you have Word 5.1a, released in 1992, which some consider to be the absolute best version of Microsoft’s word processor ever, don’t expect to have it work on your spanking new 2012 27-inch iMac.” — “The Tech Night Owl” (www.technightowl.com) […]
There’s a term for this in economics: rent-seeking behavior. One line of the Wikipedia definition is appropriate here: “Rent-seeking implies extraction of uncompensated value from others without making any contribution to productivity.”
In the case of utilities, you’re actually GETTING something for your monthly payment: continued electrical power, continued natural gas supply, continued water supply, continued dial tone. You are gaining the use of something that actually costs money to create and/or deliver (electricity, gas, water, phone/cable service).
The utility model is COMPLETLY inappropriate for any product like software. It’s created, put together, and delivered to your computer at ONE point. There’s no reason to pay a continuous monthly fee to keep this exact version running on your computer.
The correct model (which Adobe seems to be blind to) is to charge for *service contracts*. Many very expensive software products (and most hardware products aimed at the commercial market) are sold with service contracts, which do pretty much what the “software rental” model aims at doing, but doesn’t come with the implied threat of “pay us or your software dies”. (Insert image of gangsters in pinstripe suits and Tommy guns here.)
I remember when QuarkXPress was acting like they were the king of all production software. Then Adobe came along with InDesign. It was great but couldn’t import our legacy QuarkXPress files so we were stuck. Then, one day they came out with the new version that DID import our files, and did so perfectly. We couldn’t switch fast enough. Good riddance Quark!
So I wonder how long it will take Corel to figure out this same strategy? You know, I think I’ll write them a letter…
@Ken, There are still people who continue to prefer QuarkXPress, despite the company’s earlier reputation of treating customers badly.
Peace,
Gene
Now you can officially run OS X (not just OS X Server) in a virtual machine I can see plenty of companies no longer upgrading their software and just using what they have.
There was a similar problem when Adobe made their upgrade eligibility more restrictive (they used to allow upgrades from almost any prior version – not just the last one or two) but changes in OS X meant many had to buy upgrades or new licences to use the software on new machines.
If they dropped the price massively now it is digital only (no discs or manuals) and they are effectively just selling direct (no reseller margin to worry about) maybe people would be more likely to get on board.
@Matt, You have a point. Get all that for the student intro rate ($19.99 a month), and they’d be inundated with orders.
Peace,
Gene
Use “Adobe” and “drop prices” in the same sentence?? Silly you!
@dfs, If they don’t receive enough orders, market forces will force them to make that move. They are hoping to lock in customers with a lower intro rate, but there will be a lot of skepticism.
Remember that this is going to be a one-way street for anyone without a recent version of CS at hand.
Peace,
Gene
I’m in the group of Photoshop users who don’t make money from using it. I enjoy restoring old photos digitally and the power and documentation of Photoshop are a real attraction. I usually upgrade every 3 or 4 years, when I feel they’ve added enough features to make it worthwhile.
Given the way I use Photoshop, there’s no way I’ll go for a subscription service, and I suspect I’m not alone. I simply don’t use it enough to justify the financial drain of a monthly charge. I have CS6 and I’ll keep using it until my computer will no longer run it, by which time I hope that programs such as Pixelmator will be developed to the point where they meet most of my needs.
One of the reasons I like to purchase my software is I have Macs of different ages. i just finished re-installing Photoshop 7 on an old PowerBook so I can use it for light photo manipulation. It doesn’t have everything that the current version does, but it’s still useful software.
This is why I use Aperture instead of Lightroom; there are lots of things that trouble me about Apple, but I truly despise Adobe (I use Preview over Reader and iMovie over Premiere because they are easy choices since they are just “better” than the Adobe products. I don’t use Flash at all, due to security considerations). The only real market-dominating product Adobe seems to make is Photoshop, and I plan to try GIMP sometime.