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Microsoft Reports New Subscribers For Office 365 Plunged 62% (itworld.com)

Posted by EditorDavid on from the softening-software-markets dept.

An anonymous reader writes: Microsoft is having trouble selling $7-a-month subscriptions to Office 365. In the last three months of 2016, Microsoft added just 900,000 new subscriptions -- and throughout all of 2016, subscriptions increased by just 4.3 million. In fact, a chart at IT World shows that new subscriptions actually peaked in a year ago, with a steady decline in new subscribers ever since. "In each of the last three quarters, Office 365 grew by about 900,000 subscribers, the smallest quarterly increase since early 2014," they write. "Prior to the nine-month stretch of 2016, subscribers were accumulating at rates two to three times larger per quarter."
This explains why Microsoft announced 97 new markets for the software nine weeks ago. So far after four years, Microsoft's found just 25 million subscribers for Office 365 -- and it's not clear how many of those came from their $100 five-user packages. (Although those figures suggest that Office 365 subscriptions are still earning Microsoft at least half a billion dollars a year.)

22 of 353 comments (clear)

  1. Owning vs Renting by JustAnotherOldGuy · · Score: 5, Insightful

    Microsoft STILL hasn't figured out that most people prefer to own something than rent something.

    Their quest for the almighty "endless-subscription" cash-cow is failing.

    --
    Just cruising through this digital world at 33 1/3 rpm...
    1. Re:Owning vs Renting by JustAnotherOldGuy · · Score: 5, Insightful

      I wouldn't call 25 million subscribers "failing".

      Given their user base, I wouldn't call it "succeeding", either.

      --
      Just cruising through this digital world at 33 1/3 rpm...
    2. Re:Owning vs Renting by SeaFox · · Score: 4, Insightful

      Do they? How's Adobe doing with their cloud app subscriptions?

      Bad comparison is bad.
      You don't have a choice with Adobe, meanwhile the consumer can buy an Office 2016 license outright.

    3. Re:Owning vs Renting by dgatwood · · Score: 5, Insightful

      Just a few years ago, the assumption was that pretty much every computer user either owned or pirated Office. There are 1.25 billion Windows users alone, not counting the Mac users, which adds probably another .1 billion or so. So Microsoft's market share went from 100% just a few years back to 1.8% under the rental model. That's not just failing; it's failing very, very badly.

      Now this didn't happen all at once, mind you. It all started more than a decade ago when Microsoft massively overcharged for the Mac version of their office suite, resulting in the nascent iWork suite getting a foothold and eventually becoming dominant in that market. From there, they ignored the threat posed by OpenOffice and continued their existing pricing. OO gradually chipped away at the perception that everybody had to own the real thing for interoperability. So when Google Docs arrived on the scene and made it possible for folks to do most of the basics without paying a dime, there was pretty much nothing Microsoft could do about it other than try desperately to milk what was left of their collapsing market for every penny they could squeeze out of them.

      The bad news for Microsoft is that no matter what they do, they're unlikely to increase revenue much beyond their current levels. For most people, the free solutions are good enough, and the people for whom that isn't true are mostly already paying them for it. If they raise prices, more customers will look for ways to get by with the free solutions, and they'll lose subscribers. If they lower prices, nobody will suddenly think to themselves, "For just another few bucks a month, I could have Office," because the existing free tools already meet their needs.

      At this point, it's pretty much downhill from here as the free solutions continue to improve and the reasons for paying Microsoft continue to diminish. IMO, this is what a company on life support looks like, and as Michael Dell once famously said about another beleaguered company, if I were the CEO, "I'd shut it down and give the money back to the shareholders." Just saying.

      --

      Check out my sci-fi/humor trilogy at PatriotsBooks.

    4. Re:Owning vs Renting by caseih · · Score: 3, Insightful

      To put it politely, it's wishful thinking to claim that Office competitors like iWork, LibreOffice, and Google Docs have significantly impacted MS Office's market share. Office has not gone from 100% share to 1.8% share in any real sense. Perpetual licenses for MS Office are still available and, I presume, selling well, particularly in the 99% of the market that is the business world.

      What they have shown is that of the home user crowd, the relatively small number of users outside the business world, users are apparently unwilling to pay the subscription model, perhaps given the alternatives like Google Docs of LibreOffice. Or pirated copies. Or even 10 year old licenses of Office.

      But make no mistake. The MS Office hegemony is still strong and is still making MS a lot of money. And if you think about it, corporate licensing is already a de facto subscription. So it's not like they are not making money hand over fist still.

  2. *new subscribers* by Anonymous Coward · · Score: 5, Insightful

    *new* subscribers. I can only be a new subscriber once...after that i'm an existing customer. duh.

    Once MS have 100% market share their new subscribers will fall to 0. Is this a bad metric?

  3. How much abuse will customers accept? by Futurepower(R) · · Score: 3, Insightful

    The software business has become like a lot of others. There are constant tests to see how much abuse customers will accept.

    With software, there are very complicated issues, such as the cost of training employees in a user interface. That lack of detailed technical knowledge of most customers makes it easier to abuse them.

  4. Too many choices are a barrier to adoption by garcia · · Score: 5, Insightful

    About a year ago, they changed their offering and split it into so many different plans no one knows exactly what you get.

    MSFT needs to immediately limit themselves to four plans:

    1. Student

    2. Entry-level

    3. Power

    4. Everything

    And they need to make it very clear what these mean, in a single page document which is the same regardless of where you find it on Microsoft's site.

  5. Re:The decline is due to ... by Anonymous Coward · · Score: 5, Insightful

    ... the adequacy of old perpetually licensed versions ... the preference against paying annually for software licenses

  6. Re:It is shit by geek · · Score: 4, Insightful

    I'd kill to get off MS everything at my job. We're a fortune 500 and as my Director and VP once said "Microsoft is a hostile business partner"

    The MS licensing feels like protection money at this point. I can do everything for my job on Linux with the exception of Skype for Business, which we could replace if MS hadn't bought off some of our decision makers and tied us into it.

  7. Google Docs by ShanghaiBill · · Score: 5, Insightful

    Google Docs is another reason. Google Docs doesn't have all the features of MS Office, but it is "good enough" for most people. Instead of $7 per user per month, it is $0 per month. Google Docs also has less downtime.

    1. Re:Google Docs by ShanghaiBill · · Score: 5, Insightful

      Also, "cloud-based," was equivalent to "hackable."

      Google's datacenter is likely far less "hackable" than some small company's roll-yer-own solution.

    2. Re:Google Docs by Anonymous Coward · · Score: 2, Insightful

      The probability of google being a target compared to a specific small company is not the same, and you have no evidence that the risk / damage calculation is for one or the other.

  8. Re:Simple explaination by hambone142 · · Score: 4, Insightful

    I install old versions of MS Office on my computers. Some versions are VERY old but each "new and improved" version seems to be less user friendly and over-complicated.

    I despise the crowded "ribbon" for Word and Excel. Pure crap.

  9. MS Office is in no win situation by 140Mandak262Jamuna · · Score: 4, Insightful
    For 90% of the people free tools without much of bells and whistles like Google Docs is enough. One thing Google doc does well is in collaborative editing. They really invested in that one weak area of MS-Office. For the remaining 10%, 90% of their work also could be done by simple tools. The advanced features of MS Office were used by them just 10% of the time.

    And MS-Office fiddling with UI constantly, with the ribbon interface, then menu items rearranging themselves based on use etc confused lots of users of advanced features.

    --
    sed -e 's/Chuck Norris/Rajnikant/g' joke > fact
  10. Re:This is not the 1980's by markdavis · · Score: 4, Insightful

    >"Excel is unique and there's not really a replacement for it."

    And, yet, for what perhaps 90% of people use spreadsheets for, the alternatives work just fine (depends of type of user and industry, of course). I know, because I have 150 business users that use LibreOffice and zero using MS-Office. Maybe a few times a year we face an issue, and it is not because LO lacks some feature of MS-Office or Excel, but because some Excel spreadsheet we were sent is using some obscure macros, or an MS-Word document had horribly poor formatting. And then, it just requires someone to work on it a bit to fix it.

  11. Re: I wish people were that smart by zippthorne · · Score: 4, Insightful

    You say this as if it makes sense for the accounting rules to tilt the scales in favor of an objectively and substantially more costly practice simply to make compliance with the accounting rules themselves easier. To me, this seems like an argument that the accounting rules need reform.

    --
    Can you be Even More Awesome?!
  12. Re:I wish people were that smart by tlhIngan · · Score: 4, Insightful

    For many years, I sold some software to small businesses (people smart enough to successfully run their own business). We sold the software for $149 or $189. Our competitor rented theirs for $59/month. This is software that businesses would use for years, so the comparison was:
    $149 to buy it and use it for three years
    $2,124 to rent it for three years

    We had MANY potential customers choose the "cheaper" competitor even though we loudly explained the huge price difference on our web site amd anywhere pricing was mentioned. Potential customers asked us for a monthly option. Eventually we relented and offered the choice, while clearly telling new customers that buying costs a whole lot less. A lot of people chose the monthly option.

    And maybe your customers weren't so dumb and realized if they paid $60/month, they can get you on the phone to FIX THEIR PROBLEM NOW rather than paying you once and then being a drain on profits when they have a problem?

    I assume your pricing included some support with it, but if you're paying monthly, there's a presumed higher level of support given since why else are people wanting to pay you $60/month versus $150 outright?

    Perhaps they looked at your competitor and they offered 24/7 support for the price? And you offered email "when we get around to it" style support? Doesn't matter if no one ever bothers because no one has a problem

    Then there's the whole "what it costs thing" - if your software is so critical to my business, it would probably cost a lot, right? In which case maybe people felt your product was "too cheap" and thus missing important things.

  13. Re:The decline is due to ... by Tough+Love · · Score: 5, Insightful

    The preference for paying nothing at all...

    Libreoffice 100 million users, zero pirates

    --
    When all you have is a hammer, every problem starts to look like a thumb.
  14. The education market? by zerofoo · · Score: 3, Insightful

    Our school moved to Google Apps and Chrome OS about 3 years ago. Microsoft, at the time, did not have a comprehensive cloud/local strategy that could compete with the ease of use and cost (free) of Google Apps.

    Recently Microsoft has started giving away Office 365 with a local installed copy of Office for education customers. That's nice, but we are very entrenched in the Google Apps/Chrome OS ecosystem - so switching back at this point would cause lots of pain for little benefit.

    So in a period of 3 years we went from buying Office licenses for our all of our students and staff, to a totally free solution. I'm sure many other schools did the same.

  15. Re: The decline is due to ... by cdwiegand · · Score: 3, Insightful

    This. Sorry guys but open office and libre office suck both at UX and just being able to do complex shit that Excel handles pretty well. I cannot in any seriousness tell my data analysts they are going to use OpenOffice, they would laugh me out of the room!

    --
    . Define sqrt(x) as something really evil like (x / rand()), and bury it deep. Watch your coworkers go nuts.
  16. Re:The decline is due to ... by DrXym · · Score: 3, Insightful
    LibreOffice is a great suite of tools, more than enough for a lot of purposes, but some of the tools like Impress still suck compared to Office.

    An extremely trivial example of that is the placement of the button that creates a new slide. In Powerpoint there's a big button marked "New Slide", on the left hand side of the ribbon. On Impress it's buried in the toolbar somewhere on the right and not given any particular importance. One of the most basic actions is less usable in one tool over the other. A succession of little things like this compound the hassle of using the tool.

    The suite really needs to keep hitting on usability as its #1 focus and it needs to figure out how people use the tools and fashion its UI around those actions.