> Photoshop ... Consumers have voted with their wallets on #2.

Did they? Or did Adobe just stop offering #1, forcing customers into #2 whether they like it or not?

I'm partly being facetious, but it's also partly a genuine question. Is there some research you know of that shows a majority of people genuinely choosing #2, when both are on the table?

For a long time the standard model was "pay $X for the current version, then $Y to upgrade to the next version, if you want." That is pretty close to the best of both worlds, IMO, from a customer standpoint.