Microsoft announced Wednesday that its consumer-targeted Office 365 Home Premium subscription service has reached a user base of 1 million just 3.5 months after its launch. Microsoft lauded the number as proof that its grand vision of subscription-based software is taking hold.
Although first launched in June 2011, Office 365 was initially targeted to business customers who sought a way to license up-to-date versions of Office alongside syncing and Exchange capabilities. Late last year, the company announced its plans to retarget Office 365 into both business and consumer versions, with the hope of moving consumers to the highly-valuable subscription model that the company has long enjoyed from its enterprise customers. It officialy launched the program in late January of this year.
The new “Home Premium” edition of Office 365 gives users the latest version of Office on up to five Windows or Mac computers and space on Microsoft’s SkyDrive for syncing and storing documents for $99 per year. While this is a lower price than most consumers are used to paying for traditional retail editions of Office, the trade-off is that users no longer have a “perpetual” license. Once a user stops paying the subscription fee, they lose access to the desktop Office applications, although their documents remain available for use on other computers or with third-party apps that can read Office file formats.
The new terms upset consumers and caused much confusion, which Microsoft attempted to address in February. Vocal opponents decried what they described as the company’s attempt to wrest control of software away from consumers and lock them into a system of continual and indefinite payments.
Microsoft was not the only company attacked over its move to subscription software. While Microsoft still offers traditionally licensed retail copies of Office, Adobe earlier this month controversially announced its plans to do away with retail licenses completely for its creative line of applications. Going forward, new versions of Photoshop, Illustrator, Premiere, and other high-profile media applications will only be available as part of a $50 per month Creative Cloud subscription, a move that garnered significant criticism.
Despite the outcry, Microsoft at least seems to have gained a foothold. In the company’s blog post announcing the subscription milestone, Microsoft marketing VP John Case used a graphic to illustrate the rapid adoption of the company’s new subscription strategy. Of the seven major online services listed, only Instagram reached 1 million subscribers in a shorter time period. Also worth noting is that most of the services on the list are available, in whole or in part, for free, compared to Office 365’s $99 per year fee.
While Microsoft should celebrate its milestone, it may be too soon to declare victory. As a novel new service that promises to offer the entire Office suite for one relatively low yearly payment, Office 365 is easy to sell to consumers; the equivalent retail edition of Office costs $400. But after a year or two, when consumers begin to examine their technology spending and realize that they can’t stop paying Microsoft lest they lose access to their Office applications, broader consumer sentiment towards the service may rapidly change.