Microsoft raises prices of Office one-time licenses 5% to 7%

office 2016 review sway demo shot
Credit: Microsoft

Microsoft today launched Office 2016 for Windows, and simultaneously raised prices of the stand-alone licenses for both it and the Mac edition between 5% and 7%.

Office 365 subscription prices -- the "rent-not-own" model that Microsoft's been aggressively pushing since early 2013 -- did not change.

The cost of a single-license Office Home & Student 2016 edition climbed $10, from $140 to $150, a 7.1% increase. Meanwhile, Office Home & Business 2016 -- which adds Microsoft's Outlook email client to the suite -- also rose $10, from $220 to $230, or 4.5%.

Office Professional 2016, available only for Windows, retained its $400 price tag.

The single-license, stand-alone editions are sold primarily at retail, and are dubbed "perpetual" licenses because they require a one-time payment, but can then be used as long as the user wants.

That's in contrast to Office 365, which requires a monthly or annual fee to continue using the software. On the consumer side, customers can choose between Office 365 Personal ($70 annually, $7 monthly) and Office 365 Home ($100 per year, $10 each month), while businesses have options that range from $99 to $240 per user per year.

Office 365 Home is notable because it allows up to five installations of Office 2016 on PCs or Macs in the same household. All Office 365 plans, both consumer- and business-grade, also include rights to run the Office apps designed for Android, iOS and Windows 10 touch-centric mobile devices, including Android smartphones and tablets, iPhones and iPads, and Windows 10 touch-enabled tablets and notebooks.

Microsoft's price increase for Office 2016 perpetual licenses was the second since January 2013, when the company revamped its retail line-up and boosted prices by as much as 17%. Microsoft duplicated those price increases for Office for Mac 2011 -- and eliminated multi-license packages -- also in early 2013, even though the suite itself had not changed.

Although the Redmond, Wash. company did not offer a reason for the price increases -- or for that matter, even mention them in its Office 2016-is-available announcement -- they were clearly driven by a desire to put Office 365 subscriptions in a better light.

The higher prices of Office 2016 Home & Student and Office 2016 Home & Business make Office 365 slightly more compelling. A household with three PCs or Macs, for instance, that plans on sticking with perpetual licenses for three years and wants Outlook, spends just $100 per user with Office 365 Home over that span, but $230 per user with Office Home & Business 2016. The latter is up from $220 per user under the prior pricing.

In other words, a family with three copies of Office in use would have to hold onto perpetual licenses for seven years before getting more value than subscribing to Office 365 Home over the same period.

But even the perpetual license price increases did not make Office 365 Personal -- the single PC or Mac subscription plan -- more economical once its extras, including 1TB of OneDrive storage space, were eliminated. Office Home and Student 2016's $150 price tag remains the better deal, assuming the user holds onto the suite for more than 26 months.

(Previously, the break-even point in a comparison between Office Home & Student and Office 365 Personal was just over 24 months.)

Comparing prices between perpetual- and subscription-based licenses almost requires a spreadsheet. For example, if a customer wants Outlook, Office 365 Personal is more economical for up to 40 months between upgrades of the one-time license payment. (Under the prior price structure, the break-even was approximately 38 months.)

Subscribers to Office 365 can download the new Office 2016 for Windows -- the Mac version debuted in July -- using instructions Microsoft has provided for consumers and businesses.

Per license Office ownership 3 years

Office 2016's higher prices makes some Office 365 plans slightly more attractive: If customers install three or more of the allowed five copies of the suite under an Office 365 Home subscription, the 'rent-not-buy' plan is a better deal compared to holding onto an Office 2016 one-time license for just three years. On the other hand, as long as the user does not need Outlook and 1TB of online storage, Office Home & Student 2016 is a smarter purchase than repeatedly paying for Office 365 Personal.

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