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Nadella to Cook on Office revenue sharing: Drop dead

Gregg Keizer | March 31, 2014
Microsoft returns to 'freemium' revenue model for Office for iPad, escapes the bulk of Apple 'tax.'

But Microsoft is not obligated to share any Office 365 revenue from plans it sells directly to consumers through retail or its online store, or those it or its channel partners sell to corporations. Business-grade Office 365 plans start at $150 per user per year and climb to $264 per user per year. Those will be outside Apple's reach.

In-app purchases have always been liable for the 30% commission to Apple, which some have derided as an Apple "tax," but purchases outside apps have not. In early 2011, then-CEO Steve Jobs put it plainly: "Our philosophy is simple — when Apple brings a new subscriber to the app, Apple earns a 30% share," Jobs wrote in a February 2011 statement. "When the publisher brings an existing or new subscriber to the app, the publisher keeps 100% and Apple earns nothing."

Microsoft has never disclosed revenue from its Office 365 software-as-a-service or revealed how many of those subscriptions have come from in-app purchases within Office Mobile on the iPhone and Android. Its only regularly-revealed data point has been the number of Office 365 Home Premium subscribers, which was described in January as 3.5 million.

Apple will not get rich off Microsoft. Even if all 3.5 million Home Premium subscribers had purchased their plans through an app — certainly not the case — Apple would have accrued just $105 million annually, a pittance for a company that recorded $57.6 billion in the December 2013 quarter alone.

Users wary of Office 365's rent-not-one model can try the new Office for iPad apps' full functionality by tying them to an Office 365 30-day trial, which is available from Microsoft's website. For the trial, customers must provide a payment method, but can cancel the deal within the first month without being charged.


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