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

Tipping point for Office 365 subscription plans: Use four or more of the five allowed installs

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.

On Monday, Microsoft unveiled pricing for Office 2013, the next version of its suite sold as a perpetual license, and for two new plans in the by-subscription Office 365 lineup.

The numbers revealed an increase of between 10% and 17% in the cost of a perpetual license, which gives the user the right to run the software as long as he or she likes. Microsoft also dispatched several multi-license SKUs, or stock-keeping units, for Office 2010, boosting the price of replicating those offers with Office 2013 by as much as 180%. And it pegged the prices of annual subscriptions to Office 365 Home Premium, aimed at consumers, and Office 365 Small Business, that let customers "lease" the software they've installed on their desktops, notebooks and tablets.

Office Home & Student 2013, a single-license suite that includes Word, Excel, PowerPoint and OneNote, costs $140, or 17% more than its Office 2010 predecessor. The more feature- and application-packed Office Home & Business 2013, priced at $220, and Office Professional 2013, at $400, are 10% and 14% higher than their 2010 counterparts.

It was the first time that Microsoft raised the price of Office since at least 2001, when it debuted Office XP, although changes in 2010 -- when the company dumped "upgrade" pricing -- effectively increased costs for many customers.

More importantly, Microsoft eliminated three multi-license Office 2010 SKUs -- a three-license Home & Student, and a pair of two-license editions, Home & Business and Professional -- that offered major discounts.

Replicating those will be much more expensive with Office 2013, which is only available in single-license forms.

Office Home & Student 2010, for example, was priced at $150 for three licenses, while Home & Business and Professional, each with two licenses, cost $220 and $350, respectively.

To equip three PCs with Office Home & Student 2013, consumers must fork over $420 (3 x $140 per copy), or 180% more than the $150 Office 2010 edition. Buying two licenses of Home & Business, meanwhile, means $440 out of pocket, a 57% increase, while two copies of Office Professional 2013 costs $800, or 60% more than the comparable Office 2010 SKU.

It's clear to analysts why Microsoft has raised prices for perpetual-licensed copies of Office 2013, killed off the multi-license discounts, and made it prohibitively expensive to recreate those editions by selling only single-license software.

"Microsoft is trying to make the price of the subscriptions more attractive by increasing the prices of the [perpetual] licenses," said Al Hilwa, an analyst with IDC. "Microsoft is bracing for a shift to a subscription model because it's so much easier for them on a financial revenue perspective because it's more predictable."

And Microsoft knows how effective -- and lucrative -- subscriptions can be. Most of its Office revenue comes from that model in the form of enterprise agreements.

Office comparison chart
The new Office 365 subscription plans make dollar sense for consumers and small businesses if four or more of the five allowed licenses are used. (Data: Microsoft)

Wes Miller of Directions on Microsoft saw the pricing shifts the same way: They are part of what he called a "meticulous plan" to position the Office 365 subscription packages as better deals.

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