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Office 365 for consumers will cost less than $6 per month: analysts

Gregg Keizer | July 27, 2012
Microsoft must aggressively price its Office 365 subscription plans, perhaps as low as $2 a month, to convince consumers that it's better to rent software than to buy it.

Some experts were convinced that Microsoft will be very aggressive, and will peg Home Premium's price even lower than P1's.

"I expect most of the plans to stay at current prices, and to see Home Premium coming in below the $6 tag," said Daryl Ullman, the co-founder and managing director of the Emerset Consulting Group, which specializes in helping companies negotiate software licensing deals. "My guess is $2-$4 per month, but with less functionality then the Small Business Premium [plan]."

Ullman is a former Microsoft licensing manager in the company's Enterprise & Partner Group, and is the author of Negotiating with Microsoft.

Rob Helm, an analyst with Directions on Microsoft, declined to put a price on the table, but said one of the benchmarks he'll use when he analyzes Office 365 will be an earlier attempt by Microsoft to get consumers to rent the suite.

That stab was Equipt, a subscription bundle of Office Home and Student 2007, its now-defunct OneCare antivirus product, and several then-for-free online services, including Hotmail. Microsoft priced an annual Equipt subscription at $69.99, or about $5.83 per month. Customers were allowed to install Equipt, and thus Office 2007, on as many as three PCs for that fee.

Microsoft pulled the Equipt plug in April 2009, just nine months after launching the offer.

Helm noted the obvious, that Microsoft failed three years ago at a price point less than $6 a month.

His other yardstick? The current Office 365 P1 plan, which runs for $6 per month.

So if there was a consensus among the four analysts, it was the expectation that Home Premium's monthly fee will come in under $6.

That would cost consumers $72 annually -- although Microsoft could offer both monthly and yearly prices, discounting the latter -- for the right to install Office 2013 on up to five PCs, Macs and tablets.

But consumers aren't stupid, said Moorhead: They'll do the math.

Several of the analysts noted that the average user runs a version of Office for about five years before upgrading. Using that timespan, the numbers are straight forward.

At $72 annually, a consumer subscribing to Office 365 Home Premium would pay $360 total, or $72 for each of the five allowed copies, over a five-year period. That comes out to $14.40 per license per year.

In comparison, Office Home & Student 2010, which provides three perpetual licenses, lists for $149.99 and is commonly discounted at retail., for instance, sells it for $124.74.

Thus a copy of Office Home & Student 2010 would run $125 total, or $41.66 for each of the three provided copies, over the same five-year stretch. Bottom line: $8.33 per license per year.


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