Adobe (NASDAQ:ADBE) recently announced the release of a new suite of tools for game development. It released Adobe Scout, Adobe Gaming SDK and Flash C++ Compiler in a bid to promote flash games. This suite is available as part of the Creative Cloud subscription. Flash games already rule the PC world but are losing out on tablet and mobile phone market share. Therefore, by introducing these tools as part of the creative cloud, Adobe can provide a single platform to build games and will be easier to publish across formats. The casual gaming market is currently worth $5-$6 billion and is poised to grow to nearly $9 billion by 2014, according to the Casual Games Association.
Total Addressable Market
There are 1.3 billion PCs and laptops and about 500 million tablets and smartphones currently in use – this is the total size of the potential casual game market. Adobe has a monopoly over the PC market and streamlining game development is a way to capture the growing tablet and smartphone market.
Adobe Scout is a tool for game profiling and helps developers access granular internal information in ActionScript-based mobile and browser content. This, the company claims will help reveal significant performance optimization opportunities, making games better and less resource intensive.
Adobe Gaming SDK allows developers to create and monetize both 2D and 3D while Adobe Flash C++ Compiler lets developers take a game made for non-web platforms and recompile it to run smoothly on the web. This means that games made for the purpose of running on consoles and PCs can now be converted and easily played on the web via the Flash Player. This is one of the biggest opportunities for game developers and consequently Adobe as it disrupts the console gaming platform. Console games are expensive and prone to piracy and bringing them to the web can make them easily available and potentially cheaper. This, however, will change the demographics of the gamers and the users of these games are unlikely to cater to casual games, which opens up an entirely new market for both developers and Adobe.
Advantage Of The Creative Cloud
The biggest advantage for the users is that the subscription model makes it cheaper to use as opposed to buying licenses. Adobe offers the entire Creative Suite 6 for $49.99/month per user. This is much cheaper than a complete license that costs nearly $2,600 and which will become obsolete in a few years when the company rolls out new version of the suite.
There is however a chance that revenues will suffer in the short term if the cloud offering is comparable to the standalone software. If a significant portion of users switch to the subscription service, revenues could fall by as much as $650 per user per year. This is assuming a full license fee of $2,500 for each two-year release and a subscription fee of $600 a year.
We currently have a $34 Trefis price estimate for Adobe, which is slightly above the current market price.