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

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.)

Comments

Owning vs Renting

[JustAnotherOldGuy]

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.

Re:Owning vs Renting

[JustAnotherOldGuy]

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

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

Re:Owning vs Renting

[SeaFox]

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.

Re:Owning vs Renting

[dgatwood]

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.

*new subscribers*

[Anonymous Coward]

*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?

Too many choices are a barrier to adoption

[garcia]

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.

Re:The decline is due to ...

[Anonymous Coward]

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

Re:It is shit

[geek]

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.

Google Docs

[ShanghaiBill]

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.

Re:Google Docs

[ShanghaiBill]

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

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

Re:Simple explaination

[hambone142]

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.

MS Office is in no win situation

[140Mandak262Jamuna]

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.

Re:This is not the 1980's

[markdavis]

>"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.

Re: I wish people were that smart

[zippthorne]

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.

Re:I wish people were that smart

[tlhIngan]

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.

Re:The decline is due to ...

[Tough Love]

The preference for paying nothing at all...

Libreoffice 100 million users, zero pirates