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Author Topic: Weasel words from Adobe on Lightroom  (Read 14193 times)
john beardsworth
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« Reply #80 on: May 19, 2013, 02:11:31 AM »
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As a past sinner or escaped accountant...... Existing revenue recognition policies will influence the decision, but it would be surprising (to put it mildly) if they were allowed to determine it. If the business needed to change, the accounting would change to reflect it, or might absorb feature releases as "immaterial" to the policy (not easy, but conceivable in a diverse business like Adobe).

Where accounting is probably relevant here is in assessing the costs of maintaining the two models side by side.

John
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Schewe
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« Reply #81 on: May 19, 2013, 02:13:12 AM »
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One solution that many companies employ is to make software development a wholly owned subsidiary and all business units just buy software from there for packaging and resell.

Ok...you just went into the category of "don't have a friggin'"clue...

You honestly think a corporation the size of Adobe with the product portfolio it has is gonna spin off a wholly owned subsidiary for the purposes of dealing wit accounting issues? I was willing to give you some leeway till you said that. I honestly don't think you have a friggin' clue...correct me if I'm wrong. That would be a massive red flag on Wall-street and lead to a substantial re-evaluation of the company and it's stock. Do you understand the implications of revenue recognition? You seem to think it would be trivial for Adobe to totally reconstitute itself and completely change their accounting proceeders and come through it unscathed?Come on sunnycal, I expected better from you!
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Schewe
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« Reply #82 on: May 19, 2013, 02:15:52 AM »
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Where accounting is probably relevant here is in assessing the costs of maintaining the two models side by side.

Across the entire Creative Suite which is a massive number of applications and the basis of Adobe's asset portfolio. This an't just about Photoshop folks...it's about each and every app that Adobe produces–which ain't chicken feed!!!
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jaclarkaus
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« Reply #83 on: May 19, 2013, 03:17:28 AM »
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Not quite. The problem is "revenue recognition."

You have 5 software engineers (lets say $500/day) that work on feature x that is delivered in 5 months (20 weeks) with a cost of $250,000. It can be delivered as an update to existing version v or to a new version w. The software as it is costs $1000 per copy and that covers the cost of all R&D into version v. Now you've an additional $250,000 that goes into v. What portion of the $1000 per updated copy covers the $250,000? Or is v's contribution $0? And what about the new version w? If there are no feature updates for v and all the new features are only present in w then it is easier to do the math on whether w has been a success commercially.

A subscription model removes that problem and changes a few spreadsheets, making it easier to deliver new feature updates.

Revenue recognition does not change, when you sell a 'Licence' you get the income from the sale when you make the sale (and ship the product). When you sell a maintenance or subscription, you get the income over the period. We used the old SOP 98-1 but ASC 985-605 covers it all much the same, but is beyond the scope of this discussion.

What you are talking about is cost recognition, more specifically, should the cost be capitalised and amortised over current and future sales or expenses when incurred. This is a perennial discussion that exists (or at least existed) for ages, but does not change dependent on if you are selling (a large number of) perpetual licences or a large number of subscriptions - future earning is still future earnings.
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jeremyrh
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« Reply #84 on: May 19, 2013, 05:54:24 AM »
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Ok...you just went into the category of "don't have a friggin'"clue...

You honestly think a corporation the size of Adobe with the product portfolio it has is gonna spin off a wholly owned subsidiary for the purposes of dealing wit accounting issues? I was willing to give you some leeway till you said that. I honestly don't think you have a friggin' clue...correct me if I'm wrong.
He didn't say that, though, did he? He said it was a solution many companies employ - whether that's appropriate to Adobe or not.
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dreed
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« Reply #85 on: May 19, 2013, 06:27:17 AM »
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For those who are so adamantly against any sort of subscription model, is this based on experience of a subscription model or a knee jerk reaction against the change?

One of two things happen with subscriptions as a personal subscriber:

1) you set up automatic payments (or keep paying for something) that continue beyond the point at which you use/desire it;

2) the subscription expires during a period of time when you aren't using it and then you come back to use/want it and find you can't.

For a business, the subscription model kind of makes sense. I'm unconvinced that it makes sense for non-business use.

The above comments (1,2) are based on my experiences as a subscriber.
« Last Edit: May 19, 2013, 09:05:59 AM by dreed » Logged
dreed
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« Reply #86 on: May 19, 2013, 06:31:10 AM »
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And remember the title of this thread..."Weasel words" so rest assured that the OP isn't interested in reasonable discussion...the thread was started to provoke.

Well, if the output from Adobe hadn't of contained equivocations then there would have been no reason for anyone to think that they were using "Weasel words", would there? Don't blame me for the topic, blame Adobe. They chose to talk in the way they did, not you nor I. Now they may have since come out with further blog entries or statements to refine their message, but that just reinforces the point that their initial message (that contained equivocations) was flawed.
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sunnycal
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« Reply #87 on: May 19, 2013, 02:00:13 PM »
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Ok...you just went into the category of "don't have a friggin'"clue...

You honestly think a corporation the size of Adobe with the product portfolio it has is gonna spin off a wholly owned subsidiary for the purposes of dealing wit accounting issues? I was willing to give you some leeway till you said that. I honestly don't think you have a friggin' clue...correct me if I'm wrong. That would be a massive red flag on Wall-street and lead to a substantial re-evaluation of the company and it's stock. Do you understand the implications of revenue recognition? You seem to think it would be trivial for Adobe to totally reconstitute itself and completely change their accounting proceeders and come through it unscathed?Come on sunnycal, I expected better from you!

I don't think so, I know so. Amazon, Google, Oracle, and many others have or had software development subsidiaries. Adobe is no different although their organization is different. Here is a list of Adobe's current subsidiaries

http://google.brand.edgar-online.com/EFX_dll/EDGARpro.dll?FetchFilingHtmlSection1?SectionID=6998091-771759-778224&SessionID=ByjiHqfwJUWUl77

It shows that Macromedia, the developer of flash and other products, is still operating as an independent subsidiary. How is the revenue being realized from Flash? Shouldn't Adobe board be in fits?

In addition, Adobe has considerable development resources in Canada, Europe, and Asia. All of it under different subsidiaries. Those subsidiaries don't even have a separate product. They are just working on pieces of the same products. How is that happening?



« Last Edit: May 19, 2013, 06:55:31 PM by sunnycal » Logged

Vladimirovich
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« Reply #88 on: May 19, 2013, 02:08:48 PM »
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Adobe has balls
rather Adobe has us by the balls
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Vladimirovich
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« Reply #89 on: May 19, 2013, 02:10:57 PM »
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I guess you didn't understand the accounting issues for the differences between subscription & perpetual licenses...due to revenue recognition issues, perpetual licenses can not get new features for the duration of the release after the end of the quarter the version was released. Compared to the subscription model in which new features can be offered as upgrades at any time. So, perpetual licenses can only get bug fixes and maintenance updates while subscription licenses can get new feature upgrades, hence the code branch.
I see... so help me understand this... LR is available both with perpetual model and subscription (because if you get CC then you get LR w/o perperual payment)... and ACR and LR have both the same "code" for raw conversion... so we shall not expect new features in ACR w/ subscription model because  Roll Eyes Huh
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john beardsworth
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« Reply #90 on: May 19, 2013, 02:12:54 PM »
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I don't think so, I know so. Amazon, Google, Oracle, and many others have or had software development subsidiaries. Adobe is no different although their organization is different. Here is a list of Adobe's current subsidiaries.

It's really not worth arguing the point. Jeff's not 100% reliable about revenue recognition policies, but he's right to dump on your suggestion. Those companies do have subsidiaries, but they report the consolidated group results to their shareholders and the stock market.
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sunnycal
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« Reply #91 on: May 19, 2013, 02:18:56 PM »
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It's really not worth arguing the point. Jeff's not 100% reliable about revenue recognition policies, but he's right to dump on your suggestion. Those companies do have subsidiaries, but they report the consolidated group results to their shareholders and the stock market.

I think that when the term "wholly owned subsidiary" is used, it is implied that the subsidiary is a private entity which is reported under the umbrella of parent organization. This is what I meant. I was not suggesting that Adobe spin off a software development company with its own ticker symbol.
« Last Edit: May 19, 2013, 02:35:42 PM by sunnycal » Logged

Schewe
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« Reply #92 on: May 19, 2013, 02:32:45 PM »
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I see... so help me understand this... LR is available both with perpetual model and subscription (because if you get CC then you get LR w/o perperual payment)... and ACR and LR have both the same "code" for raw conversion... so we shall not expect new features in ACR w/ subscription model because  Roll Eyes Huh

I actually have no idea how Adobe is dealing with the accounting of LR in the CC...but there is only one code base for LR and the perpetual and CC versions are identical features without incremental upgrades, just updates for new cameras and bug fixes.

And the accounting for ACR is different because ACR is not a stand alone product available for sale. It will run in Photoshop, Elements, Bridge and After Effects (it may run elsewhere I can't remember of the top of my head). Bridge is another edge case because it's also not a stand alone product for sale. I have no idea how Adobe is handling the accounting for ACR and Bridge...do you?
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noisejammer
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« Reply #93 on: May 19, 2013, 02:44:13 PM »
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Hmm - "Weasel words" might be a bit strong. I don't know what I'm doing next week, let alone in three years' time.
 
Do you believe it would be better for Adobe to keep Lightroom licensing as it is, switch to a subscription model or abandon support of Lightroom all together? For the record, I prefer the first but I think we're going to either get the second or third. It may be a matter of time until this happens for all software licenses.

I've been thinking over my reaction to the CC change. Leaving the cost aside - it's patently absurd - I suppose it really comes down to me investing a fair bit of time with Lr and Ps, then finding out that sooner or later the "perpetual" licenses I purchased are going to be unusable.

On reflection, this shouldn't be much of a surprise. Much of my software from a decade back, and all of it from two decades back, is obsolete. "All" Adobe has done is force me to realise I was living in cloud-cuckoo-land. I will need to make provision with a virtual machine so that when Lr 5 and Ps CS6 are unusable, I can still get to my edits.

... But I'm fooling myself. I very seldom go back to my old images. In fact, I can't remember editing anything from last year...

My other concern is raw conversion. This is real - even if I set up a virtual machine, Lightroom and Ps CS6 will not work with the camera that I buy in 2015 (give or take.) However, the problem children are the camera manufacturers and not the software companies.

So really, I'm cross at Adobe because Canon software is crap.
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john beardsworth
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« Reply #94 on: May 19, 2013, 02:51:06 PM »
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I think that when the term "wholly owned subsidiary" is used, it is implied that the subsidiary is a private entity which is reported under the umbrella of parent organization. This is what I meant. I was not suggesting that Adobe spin off a software development company with its own ticker symbol.
You were clear about that, but what I'm telling you is that you wouldn't be able to use a subsidiary in the way you suggested to circumvent group accounting policies.

PS I wasn't clear when I wrote "Those companies do have subsidiaries, but they report...". The "they" meant "those companies", not the subsidiaries.
« Last Edit: May 19, 2013, 02:55:48 PM by johnbeardy » Logged

John Camp
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« Reply #95 on: May 19, 2013, 08:31:40 PM »
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Here's a summation, and I bet I'm right about all of it.

1. Adobe is moving to a subscription model because whatever PR problems it may cause them in the short term, in the longer term, it will make more money for them. Otherwise, they would not do it. And they made that calculation in advance. They may not have appreciated the intensity of the negative reaction, but that's not uncommon, even with huge corporations (New Coke.)

2. They could support both CC and CS versions of Photoshop, but it would cost somewhat more to do that. The extra cost would be essentially trivial when it is viewed as a tax-deductible business expense and in light of Adobe's multi-billion-dollar annual revenue. However, there may be other reasons for moving to CC, in addition to revenue. One of them would be to curtail piracy; another one would be to smooth and regularize the revenue flow; another might be that they see a dwindling supply in the magic pot, and realize that people might start upgrading with an even lower frequency than they do now if they can no longer provide compelling upgrades. So they move to a model where you pay for it, whether or not you think it's worthwhile. There are probably others that I don't know about. But they could support both versions if they wished. That is not an insuperable engineering problem.

3. Adobe is not now, and never has been, primarily run to benefit customers. It is primarily run to benefit stockholders and employees, and in that latter category, primarily management. Managers, as opposed to (at least some) engineers, are generally not idealists, because idealism mostly doesn't pay off, and management is ultimately about the payoff -- especially in public companies. I could go on for a while about this, but most people here are smart enough to understand the implication for management if it doesn't return enough to investors.

4. I believe if Adobe (at some point in the future) believes moving LR to a CC model would make significantly more money, then they'll do that. However, it's possible that they might view LR as a somewhat more complicated situation, but generally analogous, to free products like Flash or Reader -- that is, for the difference in revenue between a CC and perpetual license version, it may be worth it to the company to keep the perpetual license going simply for corporate goodwill and etc. But this would only obtain if the revenue difference would not be substantial. Without actually doing this, I think this is ultimately a version of what Jeff is arguing -- that there could be good corporate reasons for keeping LR on a perpetual license model.

5. There's reason to trust Adobe only on one basis: that it will do what its managers believe will generate the most money. We can more or less trust them to do that. But what that means for customers, I don't know. Over on The Online Photographer, there's a discussion going on about washing machines and American manufacturing. Mike Johnston, the operator of TOP, owns an old Maytag, made in Newton, Iowa, and points out that they are no longer made there. I'm originally from Iowa, and I can tell you that this is a very harsh story. Maytag had been in Newton for a long time -- decades -- and essentially was the financial mainstay of the entire community. The Maytag managers, who lived and worked in Newton, and had done so forever, decided to move production to Mexico, knowing as they did it that it would devastate the economy of an entire town where many of them had grown up and where they had most of their family and friends...and they did it anyway. And the town was economically devastated. That's modern American management, and if you trust a big company to do the "right" thing, you are hopelessly naive.

« Last Edit: May 19, 2013, 11:36:21 PM by John Camp » Logged
dreed
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« Reply #96 on: May 20, 2013, 02:22:43 AM »
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I think Adobe is discovering that it has two distinct customers that view this change in licensing quite differently:
(1) personal users
(2) corporate users

To what extent do the numbers from (1) lead to (2) or (2) lead to (1)?

What I do know is that if they alienate the college crowd with subscriptions that lead to higher costs then the college crowd may start using something else (providing they get equivalent functionality). This then impacts (2) because you have a growing crowd of people that graduate from college and no longer know Adobe products because they're using other products so as to not deal with the the CC and subscription problem. Thus when they start their work life, they want to continue using what they became familiar with earlier, leading to lower sales as the corporate subscriptions stagnate/decline. This problem won't surface now or next year but further out, 5 to 10 years and beyond.

5. There's reason to trust Adobe only on one basis: that it will do what its managers believe will generate the most money. We can more or less trust them to do that. But what that means for customers, I don't know.

How long do the current managers at Adobe plan on hanging around?
Are they planning for the short term, medium term or long term?
One could argue that you can't plan for medium/long term in IT because of the rate of change but if you sow the wrong seeds now, you're screwed.
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Robert55
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« Reply #97 on: May 20, 2013, 02:38:08 AM »
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If you now accept that planning for the medium-term in IT is impossible, you will also have to accept that the statement from Adobe about 'foreseeable future' was not 'weasel words' but as much as can be said with reasonable certainty
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jeremyrh
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« Reply #98 on: May 20, 2013, 03:52:32 AM »
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If you now accept that planning for the medium-term in IT is impossible, you will also have to accept that the statement from Adobe about 'foreseeable future' was not 'weasel words' but as much as can be said with reasonable certainty
What you say is true. It is also reason not to assume that LR in its present model will be around for long enough to entrust our work to it (not that doing so ever made very good sense).
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Robert55
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« Reply #99 on: May 20, 2013, 04:32:24 AM »
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Í'd generalize that: you would have to assume that any software, or hardware for that matter will outlast the next decennium.
Which makes the problem both bigger (any solution you choose won't be forever) and smaller (for the short term using LR is not a bigger risk than something else)
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