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Nobel Prize-Winning Economist on Adobe

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Peter Wiley
Nobel Prize-Winning Economist on Adobe
on Jun 21, 2013 at 11:53:49 am

Well, not exactly explicitly about Adobe, but this article does give some insight into Adobe's position, I think.

http://www.nytimes.com/2013/06/21/opinion/krugman-profits-without-productio...

Adobe has promised ease of updating, but they may just become content to live off of the rents from larger corporate customers.

Executive Producer
Arbour Media LLC


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Paul Neumann
Re: Nobel Prize-Winning Economist on Adobe
on Jun 21, 2013 at 3:05:14 pm

Hee-hee, "iWhatever"...Apple's answer to Adobe Anywhere.


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Andrew Kimery
Re: Nobel Prize-Winning Economist on Adobe
on Jun 21, 2013 at 3:55:28 pm

Interesting though I disagree w/Apple as an example. At least since the return of Jobs in the 90's Apple has viewed itself as a premium brand and had the healthy margins on hardware to match. Even when Macs only had 2% marketshare Apple never participated in the Dell-induced price race to the bottom. The iPod and iPhone were blasted for being over priced (especially as initial offerings from a company that has never made MP3 players or cell phones before). I'd say the iPad was the first product that came in under the expected price but I think that's because Apple was able to leverage it's suppliers for a better deal on raw materials rather than Apple lowering its margins for the iPad.

In short, Apple has always had high rent. They didn't wait to become popular and then jack up their rates.




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Oliver Peters
Re: Nobel Prize-Winning Economist on Adobe
on Jun 21, 2013 at 5:52:08 pm

[Andrew Kimery] "In short, Apple has always had high rent."

Only with hardware - not software. And in reality, when you compare hardware prices to identically equipped HP workstations or mobile workstation laptops, Apple was actually cheaper.

- Oliver

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Orlando, FL
http://www.oliverpeters.com


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Chris Kenny
Re: Nobel Prize-Winning Economist on Adobe
on Jun 21, 2013 at 6:24:46 pm

[Oliver Peters] "Only with hardware - not software. And in reality, when you compare hardware prices to identically equipped HP workstations or mobile workstation laptops, Apple was actually cheaper."

There's an interesting phenomenon with Apple's hardware. Apple assumes premium hardware as the standard. In the Windows world, the standard is cheap junk. The average sale price of a Windows notebook is something like $450 — that's going to mean flimsy plastic, bad battery life, inferior screens, useless trackpads, etc.

There are premium Windows systems, of course, but because premium is a 'specialty' segment in the Windows world, they very often do cost more than Apple's systems, since they're actually selling to fewer users than Apple is. Case in point: the MacBook Air almost certainly outsold all Wintel Ultrabooks combined last quarter. That's dozens of models dividing a smaller total number of unit sales. So Apple is going to be able to achieve economies of scale others can't, put more resources into developing their product (which lets them fairly command a higher price), and walk away with higher margins.

It's not rent seeking, it's reaping the rewards of delivering a better product in a more efficient way.

Working back around to Creative Cloud... if Adobe thinks they need to do this because they're running out of useful features to add to their apps, I just don't think that's correct. In fact, I think we're likely entering something of a golden age for image manipulation tools, as a consequence of the increasing sophistication of machine vision technology. Adobe's tech guys seem to be on top of this, with features like Roto Brush, content aware fill, automatic perspective correct, motion blur compensation, AE's new 3D tracker, etc. and this is just the start of what this technology will enable. But maybe the business folks aren't willing to bet this sort of thing will let them produce must-have upgrades on a sustainable basis.

Still, it seems odd to deliberately move to a business model that charges fewer users more money for your product. The industry-wide trend — with FCP X, Media Composer, Smoke, Resolve, etc. is in the opposite direction, with vendors lowering prices to increase adoption.

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David Lawrence
Re: Nobel Prize-Winning Economist on Adobe
on Jun 21, 2013 at 9:15:17 pm

[Chris Kenny] "Working back around to Creative Cloud... if Adobe thinks they need to do this because they're running out of useful features to add to their apps, I just don't think that's correct. In fact, I think we're likely entering something of a golden age for image manipulation tools, as a consequence of the increasing sophistication of machine vision technology. Adobe's tech guys seem to be on top of this, with features like Roto Brush, content aware fill, automatic perspective correct, motion blur compensation, AE's new 3D tracker, etc. and this is just the start of what this technology will enable. But maybe the business folks aren't willing to bet this sort of thing will let them produce must-have upgrades on a sustainable basis."

Well said. I think we're at the beginning of some amazing innovation, possible only now with the convergence of cheap, fast processing power, storage and I/O. The technology and design possibilities are amazing. Roto-brush is a great example.

The problem comes when marketing people are in charge of all business direction. I've seen countless examples of marketing cluelessness poisoning otherwise great products. I'd argue FCPX is an example of that. The product itself is great; the rift in the creative community came from a marketing blunder. Same thing with Creative Cloud.

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Patrick Murphy
Re: Nobel Prize-Winning Economist on Adobe
on Jun 23, 2013 at 7:15:31 pm

With all due respect, I think the point of Krugman's piece is being missed. He's not comparing the today's software/hardware companies with each other. Instead, he's pointing out that all of them are operating with a business plan that is radically different than General Motors of the 1950's and 60's. GM's corporate dominance was purchased only through the employment of 1 out of 100 non-agricultural American workers. Currently Apple's exalted position requires just 1/20 of that effort. Clearly GM's impact on domestic economy was much greater, and in a good way. Probably they also paid more taxes as well, but that's just a guess.

His other point I believe is that companies that rely primarily market share are typically relatively adverse to innovation. Why do it? It's fairly risky, and at least in the short run rarely rewarding. And here too I think his singling out of Apple is fair. Their recent full court press on copyright I think points to a lack of corporate confidence they can pull iPhones and iPads out of their sleeves whenever necessary.

In both cases, I think he's arguing that our current economic downturn is unlikely to be mitigated much by Microsoft, Apple, or Adobe profits. And that's different from how things used to be, and probably worth thinking about.



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Andrew Kimery
Re: Nobel Prize-Winning Economist on Adobe
on Jun 21, 2013 at 6:46:07 pm

[Oliver Peters] "Only with hardware - not software. And in reality, when you compare hardware prices to identically equipped HP workstations or mobile workstation laptops, Apple was actually cheaper."

The software is there to sell the hardware though. Apple will let you run Windows on a Mac but they won't let you run OS X on a Dell. Sure, FCP X is only $299 but when it came out you needed a relatively new Mac to run it and you'll need a top of the line Mac Pro Tube to get the most out of it.

With regards to spec-for-spec pricing on top end Mac towers and laptops... I think there's an ebb and flow there where a brand new Mac Pro used to be comparably priced but Apple's typical 12-18 month cycle was slower than the rest of the industry so a Mac tower nearing the end of its product life cycle was typically over priced compared to PC solutions. Apple never really has been one to offer budget solutions though. The closet I think they've come is allowing old iPhones to be free w/contract on some carriers. If the rumor of a new, low-cost iPhone is true then that will be a first for Apple.




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Rainer Schubert
Re: Nobel Prize-Winning Economist on Adobe
on Jun 21, 2013 at 10:56:16 pm

Not only chheaper. When I remember all the hazel in the beginning of Windows... MAC was always Plug and Play. Win was Plug and try.
WIN took years to become as easy. And have a look to how much they copied.
Take a look into an Mac Pro (actual - not the coming cafe brewer) - All the details to make life easy... Missing ramshackely plasic parts - all solid.
In my eyes the hardware wasn´t overprised (except iPhone... that is and was ever).
I love their products and details but not their newer philosophy.


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Derek Andonian
Re: Nobel Prize-Winning Economist on Adobe
on Jun 22, 2013 at 3:27:05 am

Wow, reading that article makes me want to switch to Lightworks and not look back...

Greg Andonian, a.k.a. Derek

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