Adobe Goes All-In on Web Software

Adobe Systems (NYSE:ADBE) said Monday it plans to abandon the packaged-software business and turn its design programs into a subscription-only cloud service.

Software makers are turning their attention to Web-delivered software and services. Microsoft (NASDAQ:MSFT) recently launched an online version of its Office suite and revamped its Web email service, Outlook.com. Autodesk (NASDAQ:ADSK), which makes design and engineering software, unveiled a cloud service two years ago. Subscriptions now account for almost 40% of the company’s revenue.

Adobe, the maker of popular software like Photoshop and Dreamweaver, will release new editions of its programs on Adobe Creative Cloud. According to the company, the cloud service has built a subscriber base of 500,000 paying members in its first year.

The final packaged version will be Creative Suite 6.0, Adobe’s current collection of design software.

An annual subscription for the could-based Creative Suit costs $50 per month for individuals. Existing Creative Suite customers will receive a discount of about 40% on the first year. Corporate subscriptions, which include cloud storage and administrative tools, cost $70 per month per user. The packaged version of the software suite currently retails for $1,299.

The company expects to have four million subscribers on Adobe Creative Cloud by the end of fiscal 2015.

“By focusing our energy—and our talented engineers—on Creative Cloud, we’re able to put innovation in our members’ hands at a much faster pace,” David Wadhwani, Adobe’s senior vice president and general manager of Digital Media, said in a statement.

In the first quarter, licensed and packaged software made up 67% of Adobe’s total revenue with $675.8 million in sales. That ratio fell from 77% of total revenue in the year-ago period. Meanwhile, subscription revenue from Creative Cloud and the company’s digital marketing service was $224.3 million, or 22% of revenue, up from 14%.

Shares of Adobe were down 41 cents at $46.60 in late afternoon trading.