Adobe has surprised and angered UK users by announcing it will be raising prices on its software by around 10% from 1 July - pushing the price differential based on the exchange rate between its UK and US products even further apart.
The announcement, which does not appear on Adobe's UK website, may prompt a rush to buy programs in the coming month - but could also drive would-be purchasers to lower-cost alternatives, or to pirated versions. At the same time it is reducing prices by around 13% in continental Europe, citing changes in the dollar to euro exchange rate.
The company said that the price hikes in the UK are "a difficult decision for us" but that they had been forced upon it because "the global economy has entered a state of unprecedented turmoil, and one of the side effects of this has been sharp fluctuations between GBP/EUR exchange rates". That has created problems for its desire to harmonise prices between the UK and continental Europe, it said.
The source of the problem
Existing users and would-be buyers reacted with anger. "Why can't I buy from a US store? I'm sure Adobe sources cheap labour/components, but apparently its customers are not allowed to do the same," commented "freshwebservices" on the Guardian Technology blog. Others pointed out that it is cheaper to buy the boxed copy than a downloaded version.
Adobe is in good financial health: in its last quarter, though profits fell by 29% compared to the year-ago quarter, it had a net income of $156m on revenues of $786m - a net profit margin of just under 20%. It has $2.38bn in the bank and $350m in borrowings, giving it substantial assets.
But for years UK users have noted a significant disparity between US and UK price. In 2006, when sterling was trading at nearly $2, the Guardian noted Adobe had the worst disparity in its pricing, with Photoshop CS2 at $579.99 in the US but £495.99 in the UK, instead of £347.20 - a 42% difference.
Today in the US, Design Premium CS4 is priced at $1,593.99 on Amazon (reduced from $1,799.99). At today's exchange rate that is equivalent to £982 (reduced from £1,109). However, on Amazon UK, Design Premium CS4 presently costs £1,249 excluding VAT; from 1 July, it will cost £1,372 (excluding VAT). That represents a 27% markup - though from July that will stretch to 39.7% - almost the same as it was when the pound was worth $2, rather than $1.62 as it was this week.
As the pound approaches parity with the dollar, Adobe in effect gets a revenue boost for every copy of its software sold in the UK; the fall in the pound against the dollar over the past three years does not however seem to have satisfied it.
Nobody at the executive level of Adobe UK was available to answer the Guardian's questions about the price changes earlier this week, though a spokesperson did respond to questions by email.
It declined to answer why a profitable company was raising prices during a recession that has had a serious effect on its main customer base, the publishing industry. Asked why customers should bear the brunt of the downturn when it is in a strong financial position, its spokesperson responded: "This move is a result of us seeking to harmonise our pricing across the European Union/European Economic Area, to the extent that circumstances and market conditions make this possible."
Licence revoked
The company has privately warned people who have considered buying boxed copies of the software from abroad and bringing them to the UK that licences are region-specific, and a US copy of an Adobe product could not be activated in the UK.
Asked why there is such a dramatic price disparity between the US and UK, if software is digital - and the UK is effectively a sales arm - Adobe replied: "Even though we live in a digital world, the cost to market and distribute our products through our various channels varies regionally. Our pricing reflects those cost variations, which is why we do not have a single worldwide price for English versions. As the UK is part of the EU/European Economic Area we seek to price consistently across the region, resulting in the recent price harmonisation."
"It's no wonder people feel they have no choice but to obtain pirate copies," said one commenter at the Guardian blog. "I really want to support innovation, but it's difficult to feel sympathy for Adobe when they are screwing us like this." Adobe's spokesperson dodged the question of whether the price rise might prompt more piracy: "We take piracy of our software very seriously and we have a comprehensive worldwide programme targeted at reducing both pirated use of our software, and to reduce the supply of illegitimate product available on the internet," the company said.