Can Microsoft Convince People to Subscribe to Software?

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buying separate licenses in some circumstances, but a lot of people are not going to do that much math.

A lot of people, however, will realize that this is a worse deal than they were getting before. If you upgraded to Office 2010 when it was new, you’d have paid just $150 to have it available to your family for the three years until the next update. That same setup—albeit with more stuff—will cost you twice as much under the new scheme.

Subscribing to a software service the same way you pay for cable or phone or Internet is actually a fine way to think about paying for your digital services. But it’s hard to say if there’s a broad swath of consumers who are interested in making that leap, especially if they feel like some humongous company is essentially forcing them to do it. And especially with just one option at the consumer level—$100 a year, take it or leave it.

The calculation for small businesses is somewhat different—they’re charged $150 per employee per year, but those employees can use the software on up to five computers each. I’m not sure exactly what kind of small business has five different devices assigned to each worker, but there ain’t too many of them.

Small businesses can still buy the one-time fee software for $220, but like the consumer version, its got fewer features and can only be used on one computer.

This kind of thing is unquestionably better for Microsoft because it smoothes out the spikes in revenue that come with an old-school product-release cycle. And an monthly subscription is the dream revenue stream for almost any business.

But the change could make consumers feel like Microsoft is exploiting the lack of time and energy they have for deconstructing software price schemes. For one thing, we’re still climbing out of the worst economic hole in generations, and a lot of people still do not feel very secure about their jobs, their homes, and their retirement savings.

Those people might not like the idea of getting locked into a new monthly bill that has no end in sight. And that means it’s possible that a lot of people will just buy Office 2010’s old family deal and hang on as long as possible, waiting until subscription software pricing is the only game in town. There’s some evidence of that kind of reaction already, including the entertaining comment thread on Microsoft’s own website detailing the pricing changes.

But despite the inevitable griping, it could work. And that could be really interesting.

People’s computing behaviors are rapidly changing, and with a proliferation of mobile devices and powerful laptops tapping into online services (especially Google’s Gmail and documents services), this could be a ripe opportunity for Microsoft to lead the way toward broad new adoption of the subscription business model for consumer digital services.

That would be quite a feat, especially for Microsoft, whose sense of the American consumer has been legendarily iffy over the years. It would be nice to see Microsoft leading the way on a bit of consumer technology strategy, especially if it seeds a new market opportunity for smaller companies to provide people with services for a good price.

We’ll have to wait and see—the new Office doesn’t hit the market until some time next year.

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