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Microsoft raises Office 2013 prices to push new Office 365 sub plans

Gregg Keizer | Sept. 20, 2012
Microsoft this week raised prices of its Office suite by as much as 17% and eliminated multi-license packs, all part of a plan to push consumers and small businesses toward new subscription programs, analysts said.

At $100 annually, a consumer subscribing to Office 365 Home Premium would pay $500 over a five-year period, or $100 for each of the five allowed copies. That comes out to $20 per license per year.

In comparison, Office Home & Student 2013, which provides one perpetual license, lists for $140. That's $140 over the same five-year stretch. Bottom line: $28 per license per year.

Office 365 is a deal in that scenario, and on a per-license basis is 29% cheaper. But that presupposes that the customer needs and uses all five licenses offered in Office 365.

"Will the average household equip all five seats?" asked Michael Osterman, president of Osterman Research. "Five devices that need Office, even in an average tech household, that's iffy, very iffy."

If a household buys into Office 365 Home Premium, for instance, but actually only uses two of the five licenses, the per-license, per-year cost shoots up to $50, or nearly double that of two copies of Office Home & Student 2013, which revolves to $28 per license per year.

Even at three licenses of the five allowed, the $33.33 per-license, per-year cost of Office 365 is still higher than buying three copies of Office Home & Student, where the per-license, per-year number remains at $28.

The tipping point for Office 365 Home Premium is four licenses. If a household activates four or more of the five permitted licenses, the subscription is less expensive than the same number of copies of a traditional, buy-it-own-it edition.

Use fewer than four, however, and Office 365 costs more on a per-license, per-year basis than a corresponding number of Home & Student perpetual licenses, even with Microsoft's price hike.

The same holds true for Office 365 Small Business Premium when compared to Office Home & Business 2013: Four is the magic number. Anything less and it's cheaper to equip each device used by a worker with Home & Business 2013.

The comparisons are not apples-to-apples, of course, because the Office 365 subscriptions come with bonuses, including Microsoft's promise to provide frequent upgrades, the additional storage space, Skype calling time (Home Premium), and shared calendars and video conferencing (Small Business Premium). The SKUs are hard to compare head-to-head as well, since Office 365 is a kitchen-sink edition, with applications absent from Home & Student, or even Home & Business.

(Only Office Professional 2013 includes the same set of applications as an Office 365 plan.)

But the numbers made analysts pause.

Osterman, for one. "For the average household, say with someone who does [office] work at home some of the time, this still looks like a premium model," Osterman said of Office 365's pricing. "I think Microsoft's going to be hard-pressed to sell this [to consumers]."


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