The second seems more likely.
In its latest SEC filing, Microsoft used the word "subscribers" to describe the 7.1 million, rather than, say, "users," a word choice that implied the number was paying customers.
Other factors may also be in play.
Even when Microsoft sold only Office 365 — a five-license subscription — for $99.99 annually and $8.99 monthly, it wasn't recording revenue that matched those numbers. That wasn't surprising, since Office 365 Home and Personal are regularly available for less than Microsoft's list price. On Monday, for example, Amazon.com discounted an Office 365 Home subscription by 37% (to $63.12) and Personal by 36% ($44.95).
Microsoft also offers college students a very generous deal: $79.99 for a four-year subscription, with licensing rights for two personal computers. That edition, Office 365 University, is considered a consumer version.
Perhaps not coincidentally, Microsoft has seen strong Office 365 Consumer subscription growth in the third quarter — 1 million in 2013, 1.5 million in 2014 — the back-to-school quarter as college students prepare for the next school year, especially freshmen who often buy a new computer.
At the September quarter's $74-per-subscriber revenue, Microsoft is on an annual run-rate of $526 million for Office 365 Consumer. But according to Dawson, that's still dwarfed by the sales of Office perpetual licenses, which he estimated at almost five times that of subscription revenue.
The continued dominance of traditional licensing behooves Microsoft to carefully consider its subscription strategy, Dawson said. While some analysts have predicted that Microsoft will move Office to a subscription-only business model, Dawson thought that would be foolhardy anytime soon.
"Traditional Office sales have remained surprisingly robust even in what Microsoft calls the Consumer segment," Dawson said via email. "Unless traditional sales start falling off a cliff, it's okay for Microsoft to continue to drive this slow transition, especially since by my calculations overall Consumer Office revenue is actually growing slightly over time.
"[But] it will be problematic if Microsoft attempts to shortcut this process before consumers are ready. Some consumers like the subscription model, others have resisted it with other products (Adobe's Creative Cloud products spring to mind) and so I think it would be dangerous for Microsoft to go subscription-only too soon," Dawson concluded.
Microsoft acknowledged the transition to subscriptions has been slow. In the September quarter's SEC filing, Microsoft said that non-subscription Office revenue slumped 5% on the consumer side, 7% on the commercial side; it cited customers shifting to Office 365 for the declines.
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